Oil prices have not reacted strongly upwards as Iran launched around 400 ballistic missiles towards Israel on the eve of its imminent ground attack on Lebanon.
In recent months oil speculators have remained relatively sanguine despite the increasing Middle East war, with oil prices having fallen more than 10% in the past three months.
The declining oil prices have impacted inflation. Inflation has cooled across advanced economies in recent months, paving the way for interest rate cuts by policymakers at the world’s top central banks.
The Iran attack could change the equation though;
Iran, a major oil producer, supplies approximately 3% of the world's daily oil output (3 million barrels) despite Western sanctions. Its influence over the Strait of Hormuz, a vital chokepoint for oil and gas tankers, is significant. Iran also exerts control over the Red Sea through its support of Houthi rebels in Yemen, who have targeted shipping. Other major oil and gas exporters, including Saudi Arabia, Iraq, the UAE, Kuwait, and Qatar, heavily rely on the Strait of Hormuz. The potential closure of this chokepoint by Iran could have far-reaching consequences for the global oil trade.
