Wider market context limits effect of US-Iran tensions on oil market

Following the increased tensions between the US and Iran caused by the assassination of Qassem Suleimani, Will Scargill, Managing Oil & Gas Analyst at GlobalData, a leading data and analytics company, offers his view on how this will impact the global oil market:

“Increased tensions between the US and Iran following the assassination of Qassem Suleimani certainly add risk to the global oil market. The potential for disruption to major supply centres was brought into sharp relief by the attacks on Saudi Aramco’s Abqaiq and Khurais facilities in September 2019. However, it should be remembered that the wider market context is one of global oversupply, with the OPEC+ group having agreed additional production cuts last month.

“Oil prices soon returned to previous levels after the September attacks despite these having temporarily taken out around 5% of global supply. Therefore, the effect on the oil market of these heightened tensions is likely to be time and value-limited. More significant market effects would likely only come from a major escalation in Iran’s response, such as major disruption to oil transit through the Strait of Hormuz.”

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