Targeting Israel’s Iranian Oil: Potential Economic Crisis
The government of Israeli Prime Minister Benjamin Netanyahu hesitates to deliver a retaliatory blow against Iran despite fiery statements from Israeli officials about a severe response. U.S. President Joe Biden has supported Israel’s right to respond to Iranian attacks, but concerns remain about the economic consequences of any Israeli strike.
The options available for Israel’s response to Iran include three scenarios:
- A tit-for-tat response targeting military sites.
- An escalatory response by bombing economic infrastructures such as oil and gas fields.
- Targeting nuclear facilities, which is the least likely scenario due to potential consequences.
Israel is likely to focus on Iranian economic infrastructures, particularly those related to oil, which are considered the backbone of the Iranian economy. Iran holds vast oil reserves, with a production capacity exceeding 2.4 million barrels per day, of which 1.4 million are exported daily, with China taking the majority.
If Israel targeted Iranian oil infrastructures, it would lead to significant economic upheaval. Kharg Island, which serves as the center for Iranian oil exports, would be the primary target. Iranian oil tankers have already begun moving away from the island in anticipation of potential strikes.
Consequences of Targeting Oil Infrastructure
If Israel successfully disrupted Iranian oil exports, it would lead to a substantial loss of revenue for Iran. However, China could compensate for its oil needs from other sources. While oil prices would rise, Saudi Arabia and the UAE could offset the shortfall in Iranian oil.
Iran’s expected retaliatory responses may include targeting Israeli oil facilities, such as the Haifa refinery and Ashdod refinery, and possibly targeting facilities in Gulf states. Iran might also consider closing the Strait of Hormuz, through which a significant portion of Gulf oil production transits, potentially leading to a global energy crisis.
Position of Gulf States and the U.S.
Reports indicate that Gulf states, including Saudi Arabia and the UAE, are pressuring the United States to prevent Israel from attacking Iranian oil fields, fearing that their own oil infrastructures could be targeted. Iran has expressed concern about Gulf states using their airspace for any Israeli strike.
These movements come amid Iranian efforts to influence their Gulf neighbors, warning them that any regional support for an attack on Iran could lead to retaliatory actions from their allies in the region.
In this tense climate, any escalation in the conflict between Israel and Iran, particularly in the oil sector, could create economic crises not only in the Middle East but also impact the global economy as a whole. Options remain open, but everyone understands that the consequences will be far-reaching.
