Unless Iran capitulates, uncertainty about oil supplies will keep prices high. Attacks on shipping might not have a major long-term impact, but the risks will pressure oil prices, perhaps for months.
P
resident Trumps decision to bomb Iranian nuclear facilities represents a major escalation in the conflict over Iran’s nuclear ambitions and could presage turmoil in the world economy but especially the oil market. Iran and its proxies have been seriously weakened by Israel in recent months, but that is not the same as being toothless.
Despite the desire of Israel’s Prime Minister Netanyahu, the fighting is unlikely to lead to regime change. Historically, citizens have rallied to their leaders no matter how unpopular against foreign aggression, the most recent case being Saddam Hussein’s invasion of Iran in 1980, which he thought would encourage the Iranian people to rise up, especially those Arabs in the southwestern part of the country. The opposite actually happened.
While the Iranian regime is outraged and at least initially appears less likely to negotiate, there is a possibility that they will seek a new agreement that would end the attacks and remove the sanctions. Unfortunately, it is not clear that Israel (or at least the current government) will accept any agreement and that would mean a continuation and even spreading of the conflict.
The uncertainty now is whether and how Iran might respond militarily. Missile attacks on Israel will continue as long as Israel is bombing Iran and the seems to be no exit ramp for Israel: Netanyahu doesn’t trust the Iranian regime and regards it as an existential threat to his country, and only the strictest agreement would appease Israel.
