RBC on oil - 'clear and present danger' of a wider Middle East conflict involving Iran

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RBC on oil -  'clear and present danger' of a wider Middle East conflict involving Iran

Analysis from RBC's head of global commodity strategy comes via Dow Jones / Wall Street Journal / Market Watch.

In summary:

Market participants appear to have widely subscribed to the notion that the Israel-Hamas war will remain confined largely to Gaza and don't present a threat to shipments of Middle East crude supplies

"However, we still see a clear and present danger that this will become a wider regional conflict, with three flashpoints posing particular contagion concerns"

1. Houthi attacks on shipping

• there are indications that the U.S. and U.K. are preparing a larger military operation against the Houthis in Yemen
• a key question is whether Iran will remain a bystander

2. Lebanon and Hezbollah

• An expansion of the conflict into Lebanon would present a "clear pathway" to a wider regional war given Iran's extremely close operational relationship with Hezbollah
• A more-direct Iranian role in the war would sharply increase the threat to regional energy supplies ... due to its ability to curtail traffic through the Strait of Hormuz

3. Iran-backed militias have fired hundreds of rockets at bases housing U.S. troops and areas near U.S. personnel in Iraq and Syria

• "We do not know whether President Biden shares his predecessor's kinetic redline over the loss of American life. However, we believe that if continuing assaults by Iran-backed forces lead to significant American casualties, Washington could find itself drawn back into another round of active fighting in Iraq."

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Strait of Hormuz, at its narrowest point is only 21 miles wide, while the width of the shipping lane in either direction is just two miles and separated by a two-mile buffer zone. It's the world's most sensitive oil-transportation choke point.

                This article was written by Eamonn Sheridan at www.forexlive.com.

Source: RBC on oil -  'clear and present danger' of a wider Middle East conflict involving Iran

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