“The White House has probably sought to dissuade Prime Minister Netanyahu from a Kharg Island strike, given that it could remove 90% of Iranian oil exports,” they said, referring to the Israeli leader. “However, the longer this conflict continues, the odds increase that Israel could seek to curtail the funds that Iran would need to reconstitute its nuclear program.”
The oil market has been rocked by Israel’s drive to cripple Tehran’s nuclear program and hit its military and scientific leadership with attacks that began last week. Global benchmark Brent spiked by the most the in three years on Friday, before trading slightly higher at the start of this week. The crisis has prompted banks to examine a large range of possible outcomes, including potential for disruptions to oil flows through the Strait of Hormuz.
“If regime change does become the central Israeli war aim, we do not think the Iranian leadership will prioritize keeping crude supplies steady,” the RBC analysts said. Still, “we think ‘closure of the Strait’ has emerged as something of a market straw man scenario” in recent trading, they added.
