Oil Could Triple on Iran Crisis
Energy experts warn that if the Israel-Iran conflict lasts six months, oil prices will triple, with Saudi Arabia having only 5-6 days of storage capacity before production shutdowns. Natural gas has already spiked 150% in Asia and over 100% in Europe due to damage to Qatar's LNG facilities — 20% of global supply. Despite losing 60-70% of its air defense, Iran retains capability to disrupt shipping with drones and submarines.
The looming energy crisis harkens back to previous Middle East conflicts that triggered severe economic shocks. The 1973 oil embargo saw prices skyrocket by nearly 300%, and the 1979 Iranian Revolution caused them to more than double. The 1990 invasion of Kuwait also led to a doubling of oil prices in just four months. Major economies are assessing their strategic petroleum reserves in response to the current threat. The U.S. holds approximately 415.44 million barrels, while the European Union has enough for 90 days of consumption. Japan's oil stockpiles can cover 254 days of net imports. Iran's capacity to disrupt shipping is a key factor in the current crisis. Its Shahed-136 drones have a range of up to 2,500 kilometers and can carry a warhead of 30-50 kilograms. These drones are designed to be difficult to intercept, flying low and slow on irregular flight paths. In addition to its drone capabilities, Iran possesses a fleet of Ghadir-class midget submarines. These submarines are designed for shallow-water operations and can launch torpedoes, anti-ship missiles, and lay naval mines, posing a significant threat to commercial shipping in the Strait of Hormuz. The damage to Qatar's Ras Laffan LNG facilities, which account for about a fifth of the world's supply, has had an immediate and significant impact. The shutdown has sent shockwaves through global gas markets, with the UK's natural gas futures jumping by over 40%. Key Asian importers are also feeling the effects of the LNG disruption. Qatari LNG constitutes a significant portion of the supply for several countries, including 42-52% for India, 14-19% for South Korea, and 25% for Taiwan. While Japan has stated it will not be immediately impacted due to a three-week inventory, the long-term consequences of a prolonged shutdown are a major concern for the region. The CEO of QatarEnergy has stated that LNG production cannot resume until the conflict completely ends, after which it could still take weeks to return to normal delivery schedules. This prolonged uncertainty is a significant factor for global energy markets as they navigate the ongoing crisis.
