Oil prices surged on Monday as fears of a broader war in the Middle East panicked investors. Worries about an escalation that could’ve affected oil-producing Middle Eastern countries caused a 4% rise in Brent Crude oil prices to $88 per barrel. After the heinous terrorist attacks in Israel committed by Hamas, which have thus far killed over 1,200 Israeli civilians and wounded nearly 3,000 and pushed Israel into a state of war, panic over oil prices is understandable, but not warranted.
Barring an escalation, crude oil prices will likely remain in the corridor between $80 and $90 per barrel. Prices will only surge higher if Iran, Hamas’ and Palestinian Islamic Jihad’s funder and supporter, and Hezbollah’s creator and puppet master, decides to expand the war.
Hezbollah was created by the revolutionary Iran under Ayatollah Khomeini in 1982, and since then, it has been Israel’s and America’s perennial adversary. It murdered Americans in Lebanon and beyond and took them hostage. It would be unfathomable that Hezbollah acts without the direction of Tehran.
Hezbollah exchanged rocket and artillery fire on Monday and Tuesday with the Israeli Defense Forces (IDF), and allowed its fighters to infiltrate Israel, resulting in terrorists killed. This tense atmosphere contributed to the false alerts from Israeli civil defense authorities that erroneously informed civilians the entire north was under attack.
If Hezbollah launched a full-fledged missile and drone attack on Israeli towns and military bases, followed by a ground assault, the war might expand to the Strait of Hormuz. Iran’s main oil exporting terminal in Kharg Island may be in play, and Iran’s mining of the Strait of Hormuz is likely to interdict shipping. Beyond the possibility of a multi-front war involving Iran, which, while not impossible, is also not imminent, the markets have little to fear.
Hezbollah has long been owned as a subsidiary of the Iranian government. It’s worth noting that the Secretary-General of Hezbollah, Hassan Nasrallah, was even once open about turning Lebanon into an Islamic State and facilitating its annexation into Iran.
Despite turbulent historical relations and wars, Israel’s other neighbors offer declining support for the Palestinian cause and have little incentive to support Hamas. Egypt has repeatedly closed its border with the Gaza Strip after it was identified as a source of instability for the Egyptian Sinai. With over 3 million out of 11 million of Palestinian descent, Jordan has memories of Black September, when, in September 1970, Palestinian Fedayeen attempted to overthrow the Jordanian Hashemite monarchy and establish a Palestinian state in Jordan.
When many of these Palestinians were pushed out of Jordan and fled to Lebanon, they were instrumental in igniting the Lebanese Civil War (1975-1990). The increasingly insecure Assad regime in Syria believes the Palestinians fermented the Arab Spring opposition protests in 2009.
Today, the geopolitical situation for Palestinians is drastically different from decades past. Palestinian organizations find themselves diplomatically isolated from their Arab co-ethnics. Praise for Hamas from Arab leaders may be widespread, but it is a political theater designed to appease the anti-Israeli “street” – public opinion at large.
Iranian leaders may look to thrust Hezbollah into the war to engage Israel on its Northern flank while Hamas and Palestinian Jihad attack from Gaza and the West Bank. Such a strategic decision would come at the cost of risking the personal safety of Iranian leaders. David Barnea, Director of the Israeli Mossad hinted at this before the initial attacks from Hamas occurred, noting that Israeli responses to Iranian-backed terrorism could go to “the highest echelon.”
Considering the actions taken by Hamas, Mossad will already have contemplated targeted assassinations of key leaders in the Iranian regime. Yet an intrusion from Hezbollah directed by Iran would introduce an additional and grave option of using long range kinetic strikes against Iranian assets that are wielded to fund its terrorist activities. Specific attention paid to the oil industry; Israel could target the Kharg Island terminal located off the western coast of Iran.
Iran exports 90% of its oil via Kharg Island. Crippling its operations would strike a severe blow to the Iranian economy, buoyed by recent upticks in oil prices and export activity. Associated fallout from a strike on Kharg may also impact bilateral trade with Iran’s allies. China bought 1.5 million barrels of crude from Iran in September, their highest purchasing level in over a decade.
The Iranian regime will consider the impact of economic disruption stemming from its proxy violent involvement with Israel, and a decision will probably be made with the advice and consent of Russian President Vladimir Putin.
Iran and Russia have a shared interest in higher oil prices and cooperate with Iranian drone production being used in Ukraine. Ayatollah Khamenei, Iran’s Supreme Leader, has overtly aligned himself and Iran with Putin and Xi in an attempt to build an axis of powers bent on countering the U.S.-led democratic and West-leaning world from Australia to India, and from UAE
UAE
Aggressive, nuclear-aspiring Iran using terrorists from Hamas, Palestinian Islamic Jihad, and Hezbollah as a proxy, should prompt the international community to consider how it can strengthen comprehensive support for Israel while limiting Iranian abilities to acquire funds for terrorism, threaten oil shipments, or acquire a nuclear missile arsenal – possibly with the help of Moscow, Beijing, and Pyongyang. The theocratic dictatorship in Teheran directly threatens a prosperous and peaceful Middle East, the freedom of its people, and the Western world.
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