From Operation Epic Fury to Oil at $110: The Impact of Iran’s Leader’s Death on Global Energy Markets
It was a day that shook the world and sent shockwaves through the global energy market. On January 3, 2020, the United States launched a military operation, codenamed “Epic Fury”, targeting the convoy of Iran’s top military commander, General Qasem Soleimani, as it left Baghdad International Airport. The result was a deadly strike that killed the leader of Iran’s Revolutionary Guard Corps’ Quds Force, along with several others.
The significance of this event cannot be overstated. Soleimani was a revered figure in Iran, considered a hero by many for his role in fighting against ISIS and other terrorist groups. But to the United States and its allies, he was seen as a threat to regional stability and a mastermind behind many attacks on their forces. With his death, the conflict between the US and Iran that had been simmering for years exploded into an all-out confrontation.
The immediate aftermath of Soleimani’s death was chaos and uncertainty. Iran vowed to avenge his death, and the world held its breath, wondering how this would play out. The first indication of Iran’s retaliation came on January 7, when they launched a missile attack on two US military bases in Iraq. Thankfully, there were no casualties, and tensions seemed to ease slightly. However, the situation remained tense, with both sides exchanging threats and rhetoric.
Meanwhile, the global energy market was closely watching the developments in the region. Oil prices had already been on an upward trend, driven by various factors such as OPEC production cuts and US sanctions on Iran. But with the death of Soleimani, the market was sent into a frenzy. Oil prices surged to a four-month high, with Brent crude reaching $70 a barrel and WTI touching $63. This was a significant increase from the previous day’s prices, which were at $66 and $61, respectively.
The reason for this sharp increase was the fear that the conflict between the US and Iran would disrupt the flow of oil from the Middle East, which is responsible for about 30% of the world’s oil supply. The Strait of Hormuz, a narrow waterway between Iran and Oman, is crucial for oil transportation, and any disruption in this area could have dire consequences for global energy markets.
The tension in the region continued to escalate, with Iran launching more attacks on US forces and the US responding with airstrikes. The situation reached a boiling point on January 8, when Iran accidentally shot down a Ukrainian passenger plane, killing all 176 people on board. This tragic event further heightened tensions and caused outrage around the world.
Amidst all this chaos, the global energy market was holding its breath, trying to predict the impact of the conflict on oil prices. And on January 8, the answer came in the form of a skyrocketing oil price of $70 a barrel for Brent crude and $64 for WTI. This was an increase of almost 5% from the previous day, and the highest oil prices had been in over nine months.
The world was now witnessing how the death of one man could have such a significant impact on global energy markets. But this was not the end of the conflict or the oil price surge. On January 11, Iran announced that it would no longer abide by the 2015 nuclear deal and would resume its nuclear program. This further heightened tensions and added to the uncertainty of the situation.
The following weeks saw more attacks and retaliations between the US and Iran, but thankfully, the situation did not escalate into a full-blown war. However, oil prices remained high, with Brent crude staying above $60 a barrel and WTI above $55 a barrel. And then, just when it seemed like the tensions might be easing, another event shook the global energy market.
On February 8, a US airstrike targeting an Iranian-backed militia in Iraq resulted in the death of a top commander and several others. This strike was seen as a provocation by Iran, and they retaliated by launching missiles at a US base in Iraq. The market reacted quickly, and oil prices jumped to over $65 a barrel for Brent crude and over $59 a barrel for WTI.
The conflict between the US and Iran had now been ongoing for over a month, and it had taken a toll on global energy markets.
