Iran's missile attack against Israel briefly pushed crude oil prices more than 5% higher on Tuesday.
Traders for months have downplayed the risk of supply disruptions in the Middle East, instead focusing on concerns of a potential surplus due to falling demand in China and increased oil output from OPEC+ countries.
But Israel has promised a "painful" response to Tehran's attack, which analysts say could involve targeting Iran's oil facilities. Such a move could significantly impact the global oil supply.
"There has been a lot of complacency about this war. We do need to think about a scenario where Iranian oil supplies are at risk," an analyst told CNBC.
Iran, an OPEC member, currently produces more than 3 million barrels of oil per day, its highest output in years. A major portion of Iran's oil exports pass through Kharg Island, a vital hub that could be vulnerable.
The exact impact would depend on how much damage is done, but Bob McNally, president of Rapidan Energy, said prices could increase by at least $5 per barrel if Iran's oil exports of around 1.8 bpd were taken offline.
Iran then would likely retaliate by disrupting oil shipments through the Persian Gulf, which could send prices even higher.
While OPEC has extra capacity to help stabilize the market, a serious disruption could be difficult to manage, especially if it threatens major shipping routes like the Strait of Hormuz. As tensions rise, the oil market faces increasing uncertainty.
Kate McManus ✉
Kate McManus is a New Jersey-based Newsmax writer who's spent more than two decades as a journalist.
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