Market Data
January 16, 2020
CRU: Missiles Down, Sanctions Up – the Next Chapter in U.S./Iran Relations
Written by Ross Cunningham
By CRU Senior Cost Economist Ross Cunningham, from CRU’s Global Steel Trade Service
The oil market in 2020 started with a bang—multiple in fact, over the skies of Baghdad. On Jan. 3, U.S. missiles killed Iranian Major General Qasem Soleimani and four others. Iran vowed “severe revenge” and on Jan. 8 fired missiles at air bases in Iraq where U.S. forces were housed. Following the U.S. missile strikes, tensions between the two nations were high. The decision to target a high-ranking Iranian general was likely taken with the consideration that the U.S. is now much better placed in the global oil market thanks to U.S. shale. The retort by Iran was a gesture to save face and not an act to encourage war. The hostilities provide upside risk to our Brent crude forecast, but we do not believe the tensions will escalate. The U.S. does not want a war with an oil producer (albeit a small, sanctioned one) in an election year. And Iran does not want to pick a fight with the world’s largest military—especially when it has lost its secret weapon—the ability to hold the U.S. oil market to ransom.
