FACTBOX: US widens Middle East conflict with Iran nuclear strikes

US strikes on three key Iranian nuclear facilities on June 22 have escalated tensions in an already volatile Middle East, potentially affecting global energy markets when trading resumes.

While analysts from S&P Global Commodity Insights suggest possible gains in crude prices, they note that any price strength may be temporary if Iran refrains from retaliation.

Iran has strongly condemned the US actions as a violation of international law and called for UN intervention, while Houthi rebels have threatened to target US vessels in the Red Sea if America continues supporting Israel against Iran.

Iran has "a variety of options" to respond, Iran's foreign minister Abbas Araghchi said at a June 22 press conference in Istanbul, when asked if any response would include shutting the Strait of Hormuz. Araghchi expects to visit Moscow later in the day to meet with President Vladimir Putin.

"Silence in the face of such blatant aggression would plunge the world into an unprecedented level of danger and chaos," Iran's foreign ministry said in the June 22 statement on X, formerly Twitter. Iran's foreign minister also warned that the US and its allies "should expect severe repercussions for their actions," and that the US "itself has launched a dangerous war against the Islamic Republic of Iran."

Iran's foreign ministry called for the UN Security Council, the UN Secretary General and the International Atomic Energy Agency to condemn the strike and hold the US accountable for its actions.

Hours before the attack, Yemen-based Houthi rebels said that if the US gets involved in Israel's fight against Iran, the group will target US ships and US warships in the Red Sea.

"Any American attack and aggression that supports the Israeli enemy against Iran ... cannot be ignored," a Houthi spokesperson said June 21 on X.

Marine insurance costs for energy and commodities rose even before the latest Houthi threat on fears that ships in Middle Eastern waters could be targeted. There is also elevated market anxiety that Iran could disrupt traffic in the Strait of Hormuz, which is vital to the world's energy trade.

The IEA said June 20 it stands ready to act should the Israel-Iran conflict result in disruptions to oil supplies via Hormuz.

The following are key facts about the Iran-Israel conflict and its potential impact on energy markets:

Infrastructure

• Israel launched airstrikes targeting multiple key Iranian oil and gas facilities, including the South Pars Gas Field (Phase 14), Kangan port and oil depots near Tehran.
• The South Pars gas field, the world's largest gas field and crucial to Iran's domestic gas supply, suffered a fire and partial suspension of gas production, temporarily halting around 12 million cu m/d. The fire at South Pars has been extinguished, but production remains offline pending repairs.
• The Fajr Jam gas processing plant, with a capacity of 125 million cu m/day, treats gas from the onshore Nar and Kangan fields and from phases 6-8 of South Pars, representing a substantial portion of Iran's gas processing capability.
• Iran's crude and condensate production stands at roughly 4 million b/d, with exports near 1.5 million b/d; disruption to these facilities risks significant export losses.
• Phase 14 of South Pars processes 56.6 million cu m/day of sour gas and produces 75,000 b/d of gas condensates, making it a significant component of Iran's gas infrastructure that could face further targeting.
• The Shahran fuel storage depot near Tehran was on fire on June 14, though Iran's oil ministry said that supplies had been reduced in anticipation of attacks.
• Iran's Tehran oil refinery remains operational and unaffected by Israeli strikes as of June 15, with the National Iranian Oil Products Refining and Distribution Co. reporting that no refineries have been hit.
• Iran's oil export terminals at Kharg Island, which handle the majority of the country's crude exports, remain potential high-value targets that could significantly impact Iran's ability to generate revenue.
• Missile strikes shut down Israel's largest refinery in Haifa, operated by Bazan Group. It remains offline. Scheduled two-week maintenance at Israel's other refinery, the smaller 110,000 b/d Ashdod facility, has left Israel with no operational refineries.
• Haifa was processing below its usual rates at roughly 150,000 b/d, and typically served roughly 60% of diesel and 50% of gasoline consumed in the domestic transport market. Jet fuel for Israel's military was also made at the refinery.

Trade

• The conflict has heightened fears of disruptions to oil exports from the Middle East, particularly through the Strait of Hormuz, a vital chokepoint where about 20% of the world's oil and LNG transits daily. However, many experts consider a prolonged Strait of Hormuz disruption less likely due to US naval presence.
• Iran's oil exports of around 1.5 million b/d could be directly impacted by Israeli strikes on its energy infrastructure, potentially removing significant volumes from global markets already dealing with tight supply conditions.
• Israeli gas exports to Egypt and Jordan have been suspended amid the conflict, reflecting broader regional trade disruptions.
• Houthi attacks in the Red Sea since late 2023 have already forced many ships to reroute around the Cape of Good Hope, adding approximately two weeks to Asia-Europe voyages and increasing shipping costs substantially.
• Any Iranian closure of the Strait of Hormuz would affect not only its own exports but also those of Saudi Arabia, the UAE, Kuwait and Qatar, potentially removing over 17 million b/d of crude oil from global markets. Saudi Arabia and the UAE have pipelines that can circumvent the strait.
• Regional refineries dependent on crude oil shipments through these waterways could face feedstock shortages, potentially leading to product supply disruptions across Asia, Europe and North America.
• Natural gas flows could be severely impacted, with Qatar's LNG exports of approximately 77 million mt/year (representing about 20% of global LNG supply) potentially unable to reach key markets in Asia and Europe.
• Alternative supply routes for Middle Eastern oil and gas are limited, with pipeline capacity insufficient to offset potential maritime disruptions through the Persian Gulf and Red Sea.
• Israel has begun importing jet fuel, diesel and gasoline. Israel could be forced to increase its gasoline imports from 10,000 b/d to roughly 50,000 b/d and boost diesel shipments to its ports from 10,000 b/d to 60,000 b/d, S&P Global Commodity Insights analysts estimate. Jet fuel imports could rise from zero to 10,000 b/d.
• Iranian gas supply to Turkey and Iraq so far remain unaffected.

Prices

• NYMEX front-month crude settled at $74.93/b on June 20, up $14.14 from end-May.
• War risk premiums for cargo ships sailing to ports in Israel have more than tripled to 0.7% of the value of hull and machinery (H&M) from 0.2% before the June 13 initial air strikes on Iran.
• The risk premiums in H&M coverage for ships moving through the Red Sea have climbed to 0.25%-0.30% from 0.2%-0.25% and for the Persian Gulf to 0.2% from 0.125% over the same period.
• Oil analysts at Goldman Sachs warned that if the conflict escalates further to hit Iran's oil export infrastructure, oil prices could exceed $90/b.