Great Scott! Oil Prices and Potential Regime Change in Iran? This is MAD!

Accio Oil Prices!

Honestly you wouldn't believe the headlines I've been poring over! Senior Israeli officials are suggesting their campaign against Iran *could* lead to regime change. As if things weren't complicated enough! The oil market bless its cotton socks is trying to stay calm while Israel bombs Iran the third largest crude producer in OPEC. Apparently prices are only up about 10% since the attack started. Only! As Ron would say 'Bloody Hell!'

The Unforgivable Risks

Now analysts are starting to worry about supply disruptions. President Trump in his infinite wisdom has threatened Iran's Supreme Leader (really is that *wise*?) and is mulling over helping Israel destroy Iran's nuclear program. Meanwhile Iran might target regional oil facilities if they feel threatened. It's like a particularly tense game of Exploding Snap isn't it?

Regime Change: He Who Must Not Be Named?

According to Scott Modell from Rapidan Energy Group Israel's primary goal is to degrade Iran's nuclear program. But he also suggests they have a *secondary* goal of destabilizing Iran to the point where the domestic opposition rises up. Prime Minister Netanyahu ever the politician denies regime change is the *official* goal but acknowledges it *could* happen. Defense Minister Katz however seems quite keen on 'destabilizing the regime.' It's all rather... shifty wouldn't you agree?

A History of Magical (and Economic) Upheaval

JPMorgan points out that there have been eight regime changes in major oil producing countries since 1979. Oil prices apparently spiked by an average of 76% in their wake! The Iranian revolution nearly tripled oil prices and triggered a worldwide recession. And the revolution in Libya in 2011? Another oil price spike that nearly caused a global recession. Honestly history repeats itself more often than Peeves' pranks.

Bigger Than a Blast Ended Skrewt!

Modell argues that regime change in Iran would be a *much* bigger deal than the Libyan revolution because Iran is a far larger producer. We need 'strong indicators' of a state coming to a halt before the market truly panics. I shudder to think of the economic implications.

Strait of Hormuz: Prepare for some Turbulence!

Helima Croft from RBC Capital Markets warns that if Iran feels cornered they could target energy facilities and oil tankers. They might even mine the Strait of Hormuz which is where about 20% of the world's oil flows! QatarEnergy and the Greek Shipping Ministry are already telling their vessels to avoid the strait. Rapidan even sees a 70% chance the U.S. will join Israeli airstrikes. If Iran's key uranium enrichment facility is hit oil prices would rally by $4 to $6 per barrel. If Iran fully mobilizes to disrupt shipping in the strait oil prices could surge above $100 per barrel! As Bob McNally from Rapidan says it wouldn't be a 'cakewalk.' Understatement of the century I'd say.