#Iran's Retaliation Could Cause A Middle East Oil Shock | OilPrice.com

Iran's Retaliation Could Cause A Middle East Oil Shock | OilPrice.com:

Iran’s clerical leadership, under “Supreme Leader” Ayatollah Ali HoseiniKhamene‘i, is expected to make rapid, significant, and symbolic responses to the targeted killing in Baghdad on January 3, 2019, of Iranian Revolutionary Guard Corps Quds Force commander Maj.-Gen. Qasem Soleimani.

It seems unlikely that the Iranian response would initially be to launch a military assault on Israel, which it has been planning, but, rather, something which could target the oil production and exports of the US’ key allies in the region: Saudi Arabia, the United Arab Emirates, and Bahrain, in particular (but not exclusively). The event was not only decisive for the US-Iranian dynamic, but it will also have long-term structural effects on the supply of oil and gas.

This will particularly impact (negatively) the People’s Republic of China (PRC) and, positively in the short-term, Russia. This comes at a time when the PRC economy is already suffering severe degradation, so the net effect of a significant rise in oil prices would be to accelerate the PRC recession, which would, in turn, significantly impact the global economy as 2020 progressed.

This could, then, have an impact on the US November 2020 Presidential and Congressional elections, although the decline in the PRC economy was always going to have an impact on the US during the year in any event. The pivotal event of the killing of Soleimani seems likely, therefore, to ensure that the US and the PRC will now work to cement a trade resolution as quickly as possible.