Oil Prices Likely To Spike But War Is Unlikely: Analysts
Protests have broken out in Iran over the killing of Qassem Suleimani

Oil Prices Likely To Spike But War Is Unlikely: Analysts

The assassination of a top Iranian General Qassem Suleimani by the US has escalated tensions across the world

Just 24 hours after the United States had killed top Iranian commander Qassem Suleimani near Baghdad airport in Iraq, a convoy of Iranian-backed Popular Mobilisation Forces was hit by an airstrike early Saturday in north Baghdad, killing and wounding several.

Quoting a statement from PMF, Reuters reported that "The initial report indicates that the strike targeted a convoy belonging to the medical units for the Popular Mobilisation Forces, near Taji Stadium in Baghdad.”

In Friday’s airstrike, along with Suleimani, Iraqi Hashd Al Shaabi of the PMF and Abu Mahdi Al Mohandes were also killed.

In a statement, the United States had said that at the direction of the US President Donald Trump, the US military has taken decisive defensive action to protect US personnel abroad by killing Qassem Suleimani, the head of the Islamic Revolutionary Guard Corps - Quds Force, a US-designated Foreign Terrorist Organisation.

The statement said that Suleimani was actively developing plans to attack American diplomats and service members in Iraq and throughout the region.

“He had orchestrated attacks on coalition bases in Iraq over the last several months – including the attack on December 27th – culminating in the death and wounding of additional American and Iraqi personnel. Soleimani also approved the attacks on the US Embassy in Baghdad that took place this week,” the statement said adding that the strike was aimed at deterring future Iranian attack plans.

The statement also added that the United States will continue to take all necessary action "to protect our people and our interests wherever they are around the world."

However, nobody has claimed responsibility for Saturday’s airstrike which has reportedly killed six PMF members.

Both airstrikes mark a major escalation in regional tensions that have pitted Tehran against Washington and its allies in the Middle East. And the strike, condemned by Iran and its allies as an "assassination," has been met with concern by European officials and the United Nations, who have called for de-escalation.

Status Not Heading to War

Cyril Widdershoven, a Middle East defense energy analyst holding degrees on Middle East Studies War Studies, told The Lede that the current status is not yet heading to a full war.

“The main issue is what the proxies of Iran will do in Iraq, Lebanon, Gaza etc. If they act, there will be major military action. If Iran will attack Arab oil installations it is also an act of war,” he added.

In September 2019, Saudi oil installations had come under attack. Even though Yemeni Houthi rebels had claimed responsibility for the attack, US Secretary of State Mike Pompeo swiftly accused Iran, which rejected the allegations.

A few months before that, private oil tankers passing through Strait of Hormuz had come under attack, which Saudi and US had alleged that Iran was behind.

Widdershoven said that Iran is not in a position to have a military confrontation as the USA and its Arab allies are too strong. “If Israel gets involved it is going to be hard for Iran. The current main beneficiary of this escalation is Turkey as the latter is getting a free pass by the USA in Libya,” he added.

The Turkish parliament had favoured a decision to send troops to Libya to support the UN-recognised Government of National Accord (GNA) in Tripoli. However, the US is not impressed with the decision and White House spokesman Hogan Gidley had said that US President Donald Trump had pointed out that foreign interference is complicating the situation in Libya.

On November 27, Ankara and Tripoli’s GNA signed two separate agreements, one on military cooperation and the other on maritime boundaries of countries in the Eastern Mediterranean. Since the ouster of late leader Muammar Gaddafi in 2011, two seats of power have emerged in Libya: one in eastern Libya supported mainly by Egypt and the United Arab Emirates, and the GNA in the capital Tripoli, which enjoys UN and international recognition.

Oil Prices Rising

Meanwhile, oil prices rose 4% globally following the killing of Suleimani.

Equity markets also fell after the attack on Suleimani, interrupting the bullish mood for stocks.

“The conflict could dash market hopes for a rebound of the global economy that is still to emerge from under the cloud of the US-China trade war,” Valentin Marinov, head of G-10 currency research at Credit Agricole SA, told Bloomberg.

Rapidan Energy Group, which provides differentiated and actionable insights on energy markets, policy, and geopolitics, tweeted that “while full-blown war remains unlikely, odds of a full military conflict between the US and Iran have risen 5x post-Soleimani.”

Rapidan Energy also has said that the vessels and oil facilities are at risk.

“[T]he risks of another major attack against Gulf oil vessels or facilities is now above 50%,” the firm said.

Meanwhile, Widdershoven said that the oil markets are going to be scared and prices will go up for a long time.“If war happens, prices will spike. The main clients of the Gulf Cooperation Council and Iranian oil and gas are Asia. Prices will increase and threats to supply too can also be expected,” he added.

Dozens of workers in the southern oil fields in Iraq have left the country and the American embassy urged has all US citizens to leave the country immediately.

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