Fears of World War III are greatly exaggerated

Impending war makes for great headlines, but it rattles oil markets that are already operating at the height of disconnect, contradiction and confusion. The fractious nature of oil market sentiment continues, with analysts generally reacting to a moment rather than a longer narrative, but overall, despite a momentary flirtation with 5% gains earlier Thursday, oil markets aren’t really buying the script of World War III if Israel attacked. Iran. Even the markets admit we’ve been here before, so many times.

The world is already at war, but wars are fought differently these days, and trying to cram it into a “Great World War” booth is a waste of intellectual energy. The only thing the oil markets care about is the potential for disruption if Israel were to specifically target Iranian oil and gas facilities. The shock and awe that this Israeli threat elicited from the markets initially has lost some of its drama as analysts recall every time Israel has actually targeted Iranian energy facilities, although history has generally placed a target higher on its nuclear. installations.

Even Iran’s 200-missile barrage on Israel was little more than a spectacular show that was mostly a waste of missiles. For years, decades, the markets have been talking about an “imminent” Iranian strike, while Israel has continued with targeted assassinations, even on Iranian soil, and attacks on strategic infrastructure. Even today’s wars have taken on an entertainment element, to garner specific support from the various corners of the world that social media opens up to us. We have been in a state of “imminence” for so long that it has become permanent.

Just since 2010, Israel has launched dozens of attacks on Iran – each one expected to provoke a massive response that provokes a world war. While recent Israeli assassinations of Hamas and Hezbollah leaders have been said to be a “red line,” this is not a new one, and red lines are continually crossed in today’s wars (as we saw in the Russia-Ukraine ) and simply moved to a new location. In the previous decade, Israel allegedly assassinated five Iranian nuclear scientists, along with Revolutionary Guard generals. In 2018, the Mossad raided a warehouse in Tehran housing the declassified nuclear project archives. In 2020, Israel bombed Iran’s Natanz nuclear facility, causing a fair amount of damage – and again in 2021. Also in 2021, Israel attacked an Iranian centrifuge production facility, causing a fire. Iran, too, has been using its proxies to attack Israeli and American interests for decades. We expect many more short-term spectacular bombings, but we think it will be below what the markets would have expected at the moment, which could be $100 oil and a new world war. Until the Saudis panic, this is as spectacular as the war continues to rage for their 15 minutes of fame.