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03/ Jan’20

Oil markets warily eye Mideast following U.S. airstrike in Iraq

Iraq State TV is reporting that Iran’s top general Qassem Soleimani was killed in an airport airstrike in Iraq on Thursday.

Escalation of tensions between Iran, Iraq and the United States in the wake of Thursday night’s airstrike at Baghdad’s international airport could have a dramatic impact on the oil market.

Oil futures were up $2 to $63.18 a barrel shortly after it was reported that Gen. Qassim Soleimani, the head of Iran’s elite Quds Force and Abu Mahdi al-Muhandis, the deputy commander of the Iran-backed militias known as the Popular Mobilization Forces, were both killed. However, oil watchers have been concerned about the situation since the New Year’s Eve attack on the U.S. embassy in Baghdad.

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The U.S. sanctions on Iran’s oil industry and exports have significantly cut Iranian oil exports to the tune of some $200 billion according to Iranian President Hassan Rohani. “The market is concerned that ahead of the U.S. election, Iran may ramp up such proxy attacks on American interest in Iraq and other places in the Middle East, prompting Trump to engage an all-out war with Iran, reminding the days of Gulf war,” says markets analyst Asis Ghosh.

Edward Moya, an analyst at the brokerage OANDA, told Reuters via email, “The supply-side risks remain elevated in the Middle East and we could see tensions continue to elevate between the U.S. and Iran-backed militia in Iraq.''

The deaths of Soleimani and Abu Mahdi  were first reported by Iraqi television and the attack was confirmed by the Department of Defense shortly after 9:30 pm ET

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Earlier in the day the head of Iran’s Revolutionary Guards, Major General Hossein Salami, said at a conference in Iran that “we are not afraid of any war,” according to the Mehr News Agency, an Iranian news agency headquartered in Tehran and owned by the Islamic Ideology Dissemination Organization.

Salami denied that Iran was interfering in Iraq as President Trump has charged and chided the U.S. for warmongering. “They have besieged us with economic, industrial, and scientific sanctions to keep us dependent but our nation has resisted with divine guidance,” said Salami.

Protesters burn property and wave militia flags in front of the U.S. embassy compound, in Baghdad, Iraq, Tuesday, Dec. 31, 2019. Dozens of angry Iraqi Shiite militia supporters broke into the U.S. Embassy compound in Baghdad on Tuesday after smashing

A few hours before the strike in Iraq, Defense Secretary Mark Esper told reporters that violent acts by Iran-backed Shiite militias in Iraq — including the rocket attack on Dec. 27 that killed one American — will be met with U.S. military force. “The game has changed,” said Esper.

The oil trade web site, oilprice.com said on Thursday that the sanctions against Iran “have driven away foreign investors and have contributed to a precipitous fall in the Iranian currency . . . and a major shrinking of the economy.”

This is breaking news. Please check back for updates.

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