The global economy is entering a “dangerous time” like never before as Middle East tensions remain elevated, said S&P Global’s vice chairman Daniel Yergin.
Since the Israel-Hamas conflict began on Oct. 7 of last year, the oil market has experienced minimal disruptions, with prices remaining under pressure as a result of increased U.S. production and weak demand from China. However, this sentiment has been shifting. Oil prices spiked last week on fears that Israel could target Iran’s oil industry in retaliation for Tehran’s ballistic missile attack, with industry analysts raising concerns about a genuine threat to supply.
“The Israelis have not concluded what they’re going to do in terms of a strike — that’s under discussion,” U.S. President Joe Biden told reporters at a White House press briefing last week, adding that he discouraged Israel from striking Iranian oil facilities.
Last week, both oil benchmarks saw their biggest weekly gain since March 2023. During Asia trading on Tuesday, global benchmark Brent slipped 1.77% to $79.50 a barrel, while U.S. West Texas Intermediate traded 1.83% lower at $75.77 per barrel.
Yergin told CNBC’s “Squawk Box Asia” that he expects Israeli retaliation will not just be a replay of last April, but something “much stronger.”
In April, Iran and Israel came to blows but ultimately avoided a full-scale war. Iran fired hundreds of ballistic missiles and drones at Israel in retaliation for an attack on an Iranian diplomatic facility in Syria.
When asked if the global economy is on the precipice of another supply shock resulting from Middle East tensions, Yergin said it’s a precarious time for markets.
“I think it’s a very dangerous time, one that we haven’t seen,” he said.
Additionally, while Yergin maintained that it is not certain whether Iranians have operational nuclear weapons, that is still “certainly in the backdrop,” particularly through the lens of the Israelis.
“The betting is that the Israelis would not attack, try to attack, the nuclear facilities at this time. But a few months from now, a few weeks from now, whatever it is, Iran would have the capacity — it’s thought — to deliver a nuclear weapon, and that raises the stakes,” he said, likening the moment to the 1962 Cuban Missile Crisis.
That said, Israel is a lot more concerned about Iran’s nuclear facilities than the Iranian oil industry, said Pavel Molchanov, managing director of investment services firm Raymond James. Iran’s nuclear program has progressed to a stage where, in approximately one week, the country could potentially enrich enough uranium for five fission weapons, according to estimates by Iran Watch, a website published by the Wisconsin Project on Nuclear Arms Control.
“The worst-case scenario would be something that Iran can do on its own, which is a blockade of the Strait of Hormuz. So this is not directly related to Israeli airstrikes or missiles.
The strait, between Oman and Iran, is a vital channel where about one fifth of…
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