Oil markets expect escalation in wake of U.S. strike on Iranian general.
Crude oil prices soared after Iran vowed “harsh retaliation” for a Friday morning U.S. airstrike that killed the Iranian general Qassem Suleimani, one of the most powerful officials in Iran and the architect of Tehran’s terrorist campaigns around the region.
The escalation in recent days between the United States and Iran is now entering a dangerous new phase, with Iran expected to launch both short-term reprisals, especially against U.S. forces in Iraq, and a longer-term acceleration of its efforts to acquire nuclear weapons.
Iran’s Supreme Leader, Ayatollah Ali Khamenei, said that Iran would respond to the U.S. strike with “harsh retaliation,” while a former commander of Iran’s Islamic Revolutionary Guard Corps vowed “vigorous revenge.”
Iranian Foreign Minister Mohammad Javad Zarif lambasted on Twitter what he called a “dangerous & a foolish escalation” of tensions between the two countries.
“The strike that killed Qassem Suleimani is a significant escalation in the current tensions between Iran and the United States,” said Michael Mulroy, who until last month served as the Middle East policy chief for the U.S. Department of Defense.
“He is considered a national hero in Iran and one of the most popular senior leaders despite running a clandestine organization. It is likely that Iran will feel compelled to respond by both overt and covert action against the United States and our interests. This response or responses could happen anywhere,” said Mulroy, now an analyst with ABC News.
International reaction to the killing of Qassem Suleimani
Russia’s foreign ministry and top politicians also criticized the U.S. strike, authorized by President Donald Trump, and said that it would increase the possibility of regional conflict.
The specter of Iranian reprisals spooked the oil market, with prices for Brent crude jumping more than 4 percent in early trading Friday to just shy of $70 a barrel.
Analysts fear that Iran will resume attacks on regional oil infrastructure, following earlier strikes on oil tankers near the Strait of Hormuz and a September 2019 drone and missile strike on a key Saudi oil facility that temporarily knocked out half of Saudi oil production.
“Iran will also likely resume harassment of commercial shipping in the Gulf and may launch military exercises to temporarily disrupt shipping,” said Henry Rome, an Iran analyst with the Eurasia Group, in a note. Such actions, or the spread of conflict to the oil fields in southern Iraq, could send crude prices closer to $80 a barrel, he said.
At the same time, Iran could further accelerate its uranium enrichment capabilities, after already taking a significant step to quicken its nuclear breakout capacity in November 2019. The latest steps may have already shaved Iran’s nuclear breakout time to four to seven months, said ClearView Energy Partners in a note.
That nuclear acceleration, on top of any Iranian strikes on regional energy infrastructure, could threaten Israel and “could add to the risk of regional conflict, further pressuring crude to the upside,” ClearView said.
Israeli Prime Minister Benjamin Netanyahu cut short a trip to Greece on Friday and put the Israeli military on high alert.
The U.S. strike that killed Suleimani and another top Iranian militia commander at the international airport in Baghdad came in response to an assault on the U.S. Embassy in Iraq by Iranian-backed militias.
That was itself a response to U.S. strikes in late December that killed more than two dozen Iranian-backed fighters in retaliation for the Iranian killing of a U.S. military contractor near Kirkuk, Iraq, in late December 2019.
The latest escalation is the sharpest since Trump called off a military attack on Iran in response to Iran’s September 2019 strike on the Abqaiq oil facility in Saudi Arabia.