April 19, 2024

The aftermath of an Israeli air strike on Iran's consulate in the Syrian capital Damascus.

The aftermath of an Israeli air strike on Iran’s consulate in the Syrian capital Damascus.
Photo: Firas Makdesi (Reuters)

Oil prices have risen more than 10% this year, and they’re near a six-month high after after Israeli jets dropped bombs on Iran’s consulate in Damascus, Syria. Brent crude, one of the major global oil benchmarks, is trading at $88.66 a barrel. The airstrike, which killed two major figures in Iran’s armed forces among six others, risks escalating the invasion of the Gaza Strip into a wider regional conflict.

Israel has not claimed responsibility for the attack, but Al Jazeera notes that it fits a pattern of Israeli military activity in Syria. The Associated Press reports that an Israeli military spokesman made a connection between the airstrike and a drone attack on a naval base in southern Israel. Iran, which is allied with Hamas, has not directly intervened, but the country has said that the airstrike “will not go unanswered.”

Until now, oil markets have been relatively sanguine about Israel’s siege of Hamas-controlled Palestinian territory after the group’s October attack that killed 1,200 Israelis. Since then, more than 33,000 Palestinians have died (almost certainly an undercount) and an Israeli blockade of food supplies to Gaza Strip civilians has led to famine. But that could change.

Near the onset of Israel’s retaliation, S&P Global suggested that “the eruption of war between Hamas and Israel in the Middle East puts further upward pressure on our global assessment of geopolitical risk that we already view as elevated and worsening.”

The key risk, the firm said, would be an energy shock. If Iran were to cut oil exports, that could send prices up if the likes of Saudi Arabia didn’t compensate with higher production. Further, Iran could choke traffic to the nearby Strait of Hormuz, which could severely crimp global trade. It would be like an outsized version of the trade disruptions engineered by Iran’s Houthi allies in the Red Sea.

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