By Chrysostomos Tsoufis

Never before has Iran hit Israel directly, it has always done so through proxies either through Lebanon or Yemen. When he did it on Sunday morning, it was as if he “woke up” markets and analysts who until yesterday chose(?) to ignore the otherwise visible risk.

And along with the markets some of their worst nightmares also “woke up”. which in this particular case take the form of the three-digit price of oil. That markets were taking the Iranian threat lightly is no exaggeration. Almost all analysts on major foreign television networks report that geopolitical risk has not been priced into oil prices since late November. In fact, from the current price of $90/barrel, $10 is missing. And now it’s time for $100/barrel.

Any involvement of Iran in such geopolitical tensions amounts to a risk of supply disruption. The greater the involvement, the greater the risk of disruption and the higher the price of black gold. According to the analyzes so far, some of the escalation scenarios are as follows:

  • Israel to respond by targeting Iranian oil exports. Iran produces about 3.2 million barrels per day, so an increase in the price of oil is more manageable
  • Supply routes through the Red Sea are generally disrupted. Here the disturbance is much greater because the Red Sea is also “utilized” by Russia to send its oil to Asian markets.
  • In the Armageddon scenario, Iran closes the Straits of Hormuz through which about 1/5 of the world’s oil flow and 1/3 of its LNG passes daily. In this scenario, according to simulations, oil can reach up to $200/barrel

An increase in oil prices also means an increase in fuel prices. In the extreme scenario, the prices return to the nightmarish summer of 2022. Already on SKAI TV, the former Minister of Rural Development and Professor of Economics at the University of Athens Napoleon Maraveyas estimated that the price of gasoline in the event of an escalation could reach €2.40 /liter.

The “ignition” of energy prices is expected to fuel inflation againtrashing central banks’ plans to cut interest rates.

According to Allianz Bank analysis, for every $10 increase in the price of oil, inflation in Europe increases by 1.2 points. Such a development could force the ECB to cut interest rates, for example, only once this year and not the 3, 4, or 5 that the market expects. And this will be a blow to the already struggling Eurozone economy, more than 10 countries last year faced recession due to high interest rates.

However, the first victims of the Iranian attack were the cryptocurrencies whose markets are open over the weekend. The indices were painted red with bitcoin losing even 8%, Ethereum 10.5% and Solana more than 22%.