A new geopolitical rift in the volatile Middle East region threatens to upset the global energy balance, while Europe, facing surging prices again, is on heightened vigilance.
The attack by Israel on Iranian nuclear and ballistic facilities in the early hours of Friday 13 June came as an expected culmination of a chain of tensions, causing strong shocks in global markets that now fear the worst.
According to an analysis by Deutsche Bank, there is a “serious risk of escalation” that could even bring a partial halt to Middle East oil exports.
The Seaway of Hormuz, through which nearly 20% of the world’s supply passes, remains the most dangerous spot. Even limited actions, such as strikes against tankers, would have an instantaneous impact on prices.
JPMorgan warns that an engagement in the region could drive the price of crude up to as much as $130 a barrel, escalating already heightened inflationary pressures globally.
Rise threat
Analysts predict that a 10% rise in oil prices could increase global inflation by up to 0.4% over the next year.
For Europe, which is just beginning to “breathe” from the 2022 energy crisis, the threat of record prices resuming is real.
Since hostilities began on Friday, prices of oil and gas have soared. Brent futures have risen more than 10%, touching a five-month high.
Meanwhile, Israel ordered the temporary closure of the giant offshore Leviathan – a strategic facility that produces more than 40% of the country’s natural gas.
US-based Chevron, operator of the field, said its infrastructure remains safe, but production has been halted. The event further increases uncertainty over the security of European LNG supplies, given that Egypt – a central export hub for the continent – is energy dependent on Israeli gas.
Energean has also taken action, announcing the temporary suspension of its production north of Israel, following a demand from the Israeli Energy Ministry, due to escalating geopolitical tensions. This move was made to ensure the safety of personnel and facilities.
Increase in TTF
Following Israel’s missile launches and attacks on Iran, European gas contracts (TTF) rose 5% on Friday, reaching €37.5/MWh. This reaction reflects fears that tensions in the Middle East will disrupt global LNG flows.
The attack on the South Pars field-the largest in the world-which serves mainly Iran’s domestic needs but is shared with Qatar, has heightened concerns about possible disruptions to gas & LNG supplies .
For today June 16 the wholesale price in Greece according to the energy exchange will rise by 40% and approach 91.93 euros per megawatt hour (up from 65 euros per megawatt hour yesterday) despite the fact that the energy mix is dominated by renewables at 47% along with hydroelectricity. At the same time, prices are escalating across Europe, recording an increase of 102.8% in France, over 31% in Germany, 51% in Hungary, 44.7% in Bulgaria, 44% in Austria, etc.
Against this backdrop of tension, Greece is attempting to raise the “flag” of European reaction. Environment and Energy Minister Stavros Papastavrou is in Luxembourg for the Council of Energy and Environment Ministers.
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