OPEC's Challenges Amidst Escalating Israeli-Iranian Tensions
OPEC has the capacity to offset a potential loss of Iranian oil production if Israel targets Iranian oil facilities, but it faces challenges if Iran retaliates against its Gulf neighbors. Increased Iranian oil exports, ongoing production cuts, and geopolitical tensions could impact oil prices and global supply stability.
OPEC has adequate spare oil capacity to compensate for a complete loss of Iranian supply if Israel targets the country's facilities. However, the group faces challenges if Iran retaliates by hitting installations of its Gulf neighbors.
On Tuesday, Iran fired hundreds of missiles at Israel in response to Israeli airstrikes. Israel's Prime Minister Benjamin Netanyahu warned that Iran would face severe consequences, while Iran threatened a harsh response if Israel retaliated. Israeli options include targeting Iranian oil facilities, according to U.S. news outlet Axios.
OPEC+, which includes allies like Russia and Kazakhstan, has cut production to support prices amid weak global demand. Despite enough spare capacity in theory, much of it is in the vulnerable Middle East region, which could impact availability in case of an escalation, warned Giovanni Staunovo from UBS.
(With inputs from agencies.)
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