00:03The recent US-Israeli strikes against Iran followed by Tehran's retaliatory actions could
00:08send shockwaves through the global oil market and push crude prices to levels not seen in years.
00:15Today we take a closer look at the risks. Iran remains just inside the world's top 10 oil
00:20producers despite a steep fall in output since the 1970s. A decline largely driven by repeated
00:27rounds of US sanctions. Currently the country produces about 3.1 million barrels per day,
00:33roughly half of what it produced back in the 1970s. Yet even at this level, Iran's oil output
00:39remains significant. This Islamic Republic is believed to hold the world's third largest crude
00:44reserves, cementing its strategic importance. And unlike Venezuela, another country crippled by
00:49sanctions, Iran's oil industry is in relatively better shape. But the main risk to the oil market
00:55today lies in the Strait of Hormuz, a critical waterway connecting the Middle East to the rest
01:00of the world for oil and gas shipments. Data from maritime analytics site Marine Tracker
01:05shows traffic through the strait has plummeted, with numerous oil tankers either turning back
01:11or being stopped entirely. Local Iranian media reported late Saturday that the Revolutionary
01:16Guards had warned various ships that the strait was unsafe to navigate, effectively closing the passage due
01:23to US and Israeli attacks. Washington meanwhile has issued warnings to ships about safety risks in
01:28the Gulf. The impact on oil prices remains uncertain until Brent futures markets reopen,
01:34but analysts have already sounded the alarm. Kremlin economic advisor Kirill Dmitriev warned on X
01:40that we could soon see $100 plus oil per barrel. Approximately 20 million barrels of crude oil
01:47passed through the narrow strait daily in 2024, nearly 20% of global liquid oil consumption,
01:53according to the US Energy Information Administration. Even a hint of insecurity here could make insurers
02:00spike premiums, forcing many vessels to face delays or reroutes. According to Saxo Bank analyst Ole
02:06Hansen, only Saudi Arabia and the United Arab Emirates have meaningful bypass infrastructure, capable of
02:13transporting a maximum of 2.6 million barrels daily. Yet, Jakob Larsen, safety chief at Shipping
02:18Association BIMCO, notes that US air and naval assets could re-establish shipping security if
02:25Washington decides to act. Iranian crude is not just abundant, it's cheap to produce, costing as
02:31little as $10 per barrel. Only Saudi Arabia, Iraq, Kuwait and the UAE enjoy similarly low production costs.
02:38By comparison, major Western producers like Canada and the US face costs between $40 and $60 per barrel.
02:45This means Iran benefits disproportionately from high global prices, a critical advantage for an
02:51economy heavily reliant on oil revenues. Yet, US sanctions imposed since the 1979 Islamic revolution
02:57continue to limit Tehran's export options. Under President Donald Trump's maximum pressure policy,
03:03Iran exports between 1.3 and 1.5 million barrels daily, with over 80% of that bound for Chinese
03:11refineries according to Ole Hansen at Saxo Bank. US allies in the region Kuwait, the UAE and Iraq have
03:18already been targeted by Iranian retaliatory attacks, with multiple explosions reported over Saudi Arabia.
03:24Jason Bordoff, founding director at Columbia University's Center on Global Energy Policy,
03:29warns that the risk of escalation is greater than seen in recent regional conflicts.
03:34Pierre Razou, director of studies at the Mediterranean Foundation for Strategic Studies,
03:38adds that neighboring countries hosting US military bases are particularly vulnerable,
03:43as Iran possesses intermediate-range missiles capable of striking critical infrastructure. At-risk targets
03:49include hydrocarbon hubs, power plants and seawater desalination facilities. If crude prices
03:55soar past $100 per barrel, the first time since the start of Russia's invasion of Ukraine in February
04:012022, the global economy could face renewed inflationary pressures. For the US, high oil prices
04:07could also complicate matters politically, potentially hurting former President Trump in the upcoming midterm
04:13elections, especially given his campaign promises of cheap energy for American voters. In short,
04:18the US-Israeli strikes on Iran, Tehran's reprisals and the looming uncertainty around the Strait of Hormuz,
04:24could trigger a ripple effect across the world, affecting oil markets, regional stability,
04:29and the global economy at large.
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