RBC on oil – 'clear and present danger' of a wider Middle East conflict involving Iran

<p>Analysis from RBC's head of global commodity strategy comes via Dow Jones / Wall Street Journal / Market Watch.</p><p>In summary:</p><p>Market participants appear to have widely subscribed to the notion that the Israel-Hamas war will remain confined largely to Gaza and don't present a threat to shipments of Middle East crude supplies</p><p>

"However, we still see a clear and present danger that this will become a wider regional conflict, with three flashpoints posing particular contagion concerns" </p><p>1. Houthi attacks on shipping
</p><ul><li>there are indications that the U.S. and U.K. are preparing a larger military operation against the Houthis in Yemen</li><li>a key question is whether Iran will remain a bystander</li></ul><p>2. Lebanon and Hezbollah
</p><ul><li>An expansion of the conflict into Lebanon would present a "clear pathway" to a wider regional war given Iran's extremely close operational relationship with Hezbollah</li><li>A more-direct Iranian role in the war would sharply increase the threat to regional energy supplies … due to its ability to curtail traffic through the Strait of Hormuz</li></ul><p>3. Iran-backed militias have fired hundreds of rockets at bases housing U.S. troops and areas near U.S. personnel in Iraq and Syria</p><ul><li>"We do not know whether President Biden shares his predecessor's kinetic redline over the loss of American life. However, we believe that if continuing assaults by Iran-backed forces lead to significant American casualties, Washington could find itself drawn back into another round of active fighting in Iraq." </li></ul><p>—</p><p>Strait of Hormuz, at its narrowest point is only 21 miles wide, while the width of the shipping lane in either direction is just two miles and separated by a two-mile buffer zone. It's the world's most sensitive oil-transportation choke point.
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This article was written by Eamonn Sheridan at www.forexlive.com.