Iran’s ability to disrupt oil supply flows appears to be limited and could degrade further over time, analysts at Wolfe Research have argued.

Track the fallout from the Iran conflict with InvestingPro
Investor sentiment has been battered, despite the reasonably positive close on Monday, on concerns that the conflict in the Middle East is widening.

Israel struck targets in Iran and Lebanon, while Tehran launched its own barrage of counter-attacks, as the conflict in the Middle East further widened on Tuesday. Targets in the Iranian capital of Tehran were attacked, as well as command centers and weapons storage facilities of Iran-supported Hezbollah in Beirut, Israel’s military said.

Meanwhile, the U.S. embassy in the Saudi Arabian capital Riyadh was hit by Iranian drones, along with Amazon data centers in the UAE and Bahrain, as Iran retaliated by launching strikes across several Middle Eastern countries.

Tensions have also intensified after Iranian officials vowed to attack any ship attempting to pass through the vital Strait of Hormuz waterway, raising the prospect of disruption to crude flows from the major Gulf producers.

But, in a note, the Wolfe analysts said Iran’s capabilities to disrupt these flows “appear limited, and may degrade even further over time.”

“Even more so, Iran does not seem capable of forcibly closing the Strait of Hormuz,” the analysts added. The strait is a crucial shipping artery through which a fifth of global oil supplies flow, much of it going to Asia.

“[M]ilitarily closing the Strait at this point would need to be done through anti-ship ballistic missiles, cruise missiles, and drones, which the U.S. is actively working to neutralize,” the analysts said.

However, they warned that “more adverse scenarios ahead” cannot be ruled out, particularly as stockpiles of missile interceptors start to dwindle.

Brent futures soared 8.6% to $84.36 a barrel and U.S. West Texas Intermediate crude futures rose 8.3% to $77.12 a barrel.
Source: Investing.com