What the Media Is Getting Wrong With The Iran-Israel Conflict
Keith Kohl
If the road to hell is paved with good intentions, then the road to $100 oil is paved with drone strikes, tanker threats, and geopolitical pissing matches.
The latest geopolitical chaos over the weekend and subsequent surge in crude oil prices shouldn’t have come as a surprise to anyone paying attention; it certainly didn’t to us, at least.
As it turns out, timing the bottom in oil was much easier this time around, almost as easy as when WTI prices were trading at negative $37.63 per barrel five years ago.
Did you get that foreboding sense of the oil price spike when it was trading around $55 per barrel?
Never mind that the market seemed to outright ignore the tightening supply/demand fundamentals.
Between healthy demand growth pushing global oil consumption to new all-time high this year and the overly-optimistic expectations from non-OPEC supply (not to mention low global inventories), we all felt a bit of disbelief watching oil trading around $60/bbl.
But hey, nobody ever accused the market of being rational.
Ah, but there’s one thing nobody can dismiss, dear reader; one thing that can strike fear into the hearts of the most stout oil bears and have people mouthing the words, “$100 oil is coming” to themselves silently.
All it took were a few missiles in the right desert to remind the market what real geopolitical risk looks like — enough to send oil prices ripping higher and the world to hang on the edge of their seats for what comes next.
I’m referring to WAR.
You can’t say you didn’t see this one coming.
Whether it was Israel’s strike on Iran’s Consulate in Syria last April, which led to the first missile and drone attack on Israel by Iran two weeks later, or the killing of Hezbollah leader Hassan Narallah last September, which prompted a second direct attack by Iran, we’ve seen a steady escalation between the two countries for more than two years.
The stage was set for what took place over the weekend.
The scorching attacks that took place last Friday by Israel on Iran’s nuclear and military facilities was unprecedented. Yet, it was Saturday and Sunday’s follow-up strikes that expanded the scope of Israel’s target by going after Iran’s energy structures.
But there is something that most of the media didn’t quite catch… did you?
If you were Israel and you wanted to utterly decimate Iran’s energy sector, there’s one place to strike — Kharg Island. This is where about 90% of Iran’s oil exports flow through.
It would’ve been the best way to cripple Iran’s oil revenues.
And yet it didn’t happen.
Instead, Israel chose energy targets that were aimed more at damaging Iran’s domestic energy infrastructure. Israel decided to strike the country’s largest gas processing facility in the South Pars field, as well as the Shahran Fuel and Gas Depot in central Tehran, which happens to be Iran’s largest fuel storage and distribution hub.
Israel’s strikes weren’t just military retaliation. They were economic sabotage.
One can’t help but wonder if Israel is trying to hold back from angering the global oil trade. If China can still get its cheap oil from Iran, perhaps it wouldn’t step in.
It’s a smart move, because watching the wild oil predictions over the last few days has been interesting, to say the least. Even though Brent crude prices jumped to nearly $80 per barrel, the calls for $120/bbl oil were everywhere.
Let me be clear here: Without directly going after Iranian oil exports, we’ll never see oil hit triple-digits.
Of course, the threats from Iran to close the Straits of Hormuz are equally ridiculous.
Although Iran tends to make this threat every few years, the force that would come down on them from neighboring oil-producers would be harsh and swift — if they want to see just how quickly the world will back Israel, then Iran should start blocking oil flows through there.
Geopolitics may have turned the tap on instability, but investors now have a clear takeaway: oil is back, and so are the profits.
Dan Steffens
Energy Prospectus Group |
