Global energy markets are preparing for a significant spike in oil prices following an airstrike that killed Iran’s Supreme Leader, Ali Khamenei and several top officials. The escalation has already led to the suspension of major shipping lines in the Persian Gulf and raised concerns over regional stability.
The strike, which took place on Saturday, also killed the head of the Islamic Revolutionary Guard Corps (IRGC) and the Iranian defence minister. In response, the Iranian regime has attempted to disrupt global shipping routes through the Strait of Hormuz. The world’s three largest container shipping lines have suspended services in the region, and at least 150 tankers have reportedly dropped anchor in open waters to avoid the conflict zone.
Analysts at SEB suggest that oil prices could range from 100 to 120 US dollars per barrel if the disruption to energy infrastructure worsens. As of Monday morning, oil prices had risen to 79 dollars per barrel (Brent), up from around 73 dollars per barrel on Friday. The reason why the oil price hasn’t moved more could be because markets don’t expect Iran to target tankers and energy infrastructure more intensely, and that the US military can prevent such attacks from occurring if this should change.
In earlier publications, SEB’s analysts have argued for a war price of oil centring around 85 dollars per barrel. While the loss of top leadership is significant, the Iranian political system is designed to function through entrenched institutions rather than a single individual.
“The Iranian regime perceives its own survival to be at risk and opts to pursue a strategy of destabilising global markets as a last-ditch resort”, said Erik Meyersson, Chief Emerging Markets Strategist at SEB.
The military situation has evolved into a “missile math” challenge, where the rate of Iranian missile launches is tested against the depletion of US and Israeli air defence interceptors. Iran is reportedly using its older missile technology first to exhaust the interceptor supplies of its opponents.
Despite the leadership vacuum, a temporary council has been established to manage the country, including President Pezeshkian and the Chief Justice. This suggests that the hardline political establishment remains in control of the state’s direction.
“These economic networks, and the large number of individuals involved, ensure that overturning the system is much harder than killing the top political and religious leader of it”, Erik Meyersson said.
Read SEB reports:
Iran’s Survival Calculus, Institutional Entrenchment and the Limits of Decapitation
Are US strikes on Iran market-containable?
