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Nightmare scenarios for a jump above 100 dollars in the price of oil – The importance of the Straits of Hormuz

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The eyes of the entire planet are on the Middle East, < strong>waiting for any Israeli response to the attackwith drones and missiles from Iran on Saturday night. At the same time, the reaction of the markets to the new data and especially to what behavior the price of oil will have is eagerly awaited.

There are not a few who talk about a possible jump above 100 dollars a barrel and even immediately, while there are also the most pessimistic, who see new highs, especially in the event that Iran closes the Straits of Hormuz, from the which passes a large part of world production, but also almost all of the LNG produced by Qatar. shaping the price of oil.

An additional peculiarity with the present situation is that Iran, which is one of the two involved, is an oil-producing country in all that that means.< /p>

Last Friday, investors didn't believe the hit would happen or didn't rate it as serious. It remains, therefore, today to see under the weight of the new data what their “verdict” will be, although most predict that it will not be mild.

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Brent could soar to $100 a barrel if Iran attacks Israel, according to Bob McNally, president of Rapidan Energy and a former senior Bush administration energy official. If the escalation leads to a disruption in the Strait of Hormuz, a critical trade route for oil, prices could reach as high as $120 or $130 a barrel, McNally told CNBC before the Iranian attack.

It is worth noting that a possible increase in oil prices may also put a brake on the Central Banks' plans for interest rate cuts. Analysts note that the four declines some expect are likely to moderate to one.

The importance of the Straits of Hormuz

The Straits of Hormuz is located between Oman and Iran. The sea passage connects the Persian Gulf with the Gulf of Oman, and by extension with the Arabian Sea. At the narrowest point of the strait the distance between the two shores is 33 kilometers, with the navigation lane limited to just three kilometers in each direction.

As Reuters notes, countries in the region such as the United Arab Emirates and Saudi Arabia have repeatedly tried to find other routes to bypass the Straits, including building more oil pipelines.

The strategic importance of the Straits lies in the colossal amount of oil transported through the strait. An average of 20.5 million barrels per day (bpd) of crude oil, condensates and petroleum products are moving through Hormuz in the January-September 2023 period, according to data from analytics firm Vortexa.

The largest volumes of oil produced by the OPEC countries, Saudi Arabia, Iran, the United Arab Emirates, Kuwait and Iraq, is transported through the strait, while almost all of the LNG exported by Qatar, the world's largest exporter of liquefied natural gas, is transported through the Straits. A total of about 80 million metric tons or 20% of global liquefied natural gas flows pass through the Straits each year, according to Vortexa.

source: newsbeast.gr

Source: 24h.com.cy

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