Growing tensions in the Middle East, specifically the potential closure of the Strait of Hormuz, could trigger «serious economic turmoil».
The conflict in the Middle East is intensifying rapidly, accompanied by fierce political rhetoric. Ismail Kousari, a member of the Iranian parliament`s national security and foreign policy commission, stated that Iran might close the Strait of Hormuz due to Israeli strikes. This crucial waterway transports 20% of the world`s oil. Iraq`s Foreign Minister, Fuad Hussein, warned that such a move by neighboring Iran would cause «serious economic turmoil», potentially driving oil prices to $200–300 per barrel. He added that this could fuel inflation in European countries and complicate oil exports for producers like Iraq.
However, the oil market rally predates the recent Middle Eastern events, with participants already anticipating potential shortages. Concerns were raised by the European Union`s resolve to lower the price cap on Russian Urals oil from $60 to $45 per barrel, as well as potential sanctions against Tehran. Before the Israeli strikes on Iranian territory, benchmark Brent crude rose nearly 1.8% to $68 per barrel. Immediately after the strikes on June 13, oil prices surged over 13%, returning to January levels at $78.5. Simultaneously, OPEC+ nations had agreed to increase production. Theoretically, this would compensate for Iran`s potential shortfall, but the logistics of oil transportation are now uncertain. While this situation might seem to prevent the European Commission from lowering the cap on Russian oil, experts hold differing views on the conflict`s economic impact on Russia.
According to Maxim Chernyaev, Director of the Center for Strategic Studies at RUDN University`s Faculty of Economics, the events of recent days are unlikely to cause major shifts in the market. He expects prices to remain in the $60-80 per barrel range, with potential short-term spikes to $90 driven more by speculation than genuine demand. Chernyaev believes the conflicting parties will soon reach an agreement and that any oil price increase benefits Russia.
Vasily Girya, Director General of GIS Mining, suggests Brent could reach $80, $120, or even higher, but prices will likely fall back towards $63-66 once de-escalation risks decrease. He notes, however, that Russia`s economy doesn`t directly benefit from this due to the price cap on Russian oil. While shares of oil companies might rise, this is merely market dynamics. Girya adds that the ruble could strengthen in response, with the dollar potentially falling to 77 rubles, or even 75 if the conflict persists.
Market analysts, however, primarily focus on geopolitics, which remains highly unpredictable. Financial expert Andrey Vernikov believes Brent oil has stabilized above $70 per barrel for the next two months due to the situation involving Iran. He expresses caution regarding `alarmist forecasts` of $200-$300 per barrel, arguing that the global economy, already impacted by factors like past tariff wars, cannot sustain prices over $100 without demand slowing down. He recalls the 2008 scenario where oil briefly hit $140 before dropping to $50 amid global economic issues.
Vernikov concludes that OPEC+ will likely adopt a wait-and-see stance, viewing the Iran-Israel confrontation as probably short-lived. He suggests Iran, weakened by sanctions and lacking the capacity to confront US-backed Israel, will likely seek a diplomatic resolution. For Russia, sustained high oil prices for at least a quarter are crucial, as brief spikes to $100 or more offer minimal budgetary benefits. He believes a positive outcome for Russia would be if oil prices remain consistently above $70 per barrel through the end of the year.
