Cash-strapped drivers could be hit with a huge boom in fuel prices if the conflict in the Middle East explodes into all-out war, experts warned last night.
The cost of oil ballooned by about five per cent in just two days to $76 per barrel, as Israel vowed to take revenge against Iran after Tehran’s missile strike on Tuesday.
Defence chiefs have warned Israel could target Iran’s lucrative oil refineries in retaliation to the 180-strong barrage of missiles that rained down on Israeli cities.
Despite sanctions by the West, Iran is the third biggest producer of crude oil in the OPEC group of oil-producing countries and is heavily reliant on its fossil fuel and gas exports to prop up its ailing economy amid years of sanctions.
In a stark warning overnight, analysts said a major escalation in fighting could see oil prices rocket to $100 a barrel driving up pump prices for motorists worldwide.
Pictured is the change of oil prices during the year, with the strikes by Iran on Tuesday causing an rise in the price per barrel
Motorists could be hit with a huge boom in fuel prices should the conflict in the Middle East continue to escalate (file image)
It comes as war continues to rage in the Middle East. Pictured is smoke rising from Beirut after an Israeli airstrike on the Lebanese city on Thursday
The dire warning comes at a time when fuel prices have been falling, after record-breaking surges following the Covid pandemic and the on-going war in Ukraine.
They were down 6.5p a litre in September, putting £3.60 back into drivers’ pockets every time they fill up a 55-litre tank.
According to the RAC, petrol is now on average 134.9p and diesel is 139.5p – marking one of the biggest price drops in 24 years.
A second threat looming on the horizon is the potential impact the Labour Government’s first Budget will have on pump prices.
Chancellor Rachel Reeves will need to decide whether it will keep the current fuel duty freeze, as well as the 5p reduction brought in by the Conservatives.
Currently. Iran exports 1.56million barrels of oil per day, mainly to China. This is only about two per cent of global demand and could easily be covered by the Opec oil cartel’s six million barrels per day in reserve capacity.
But if the war in the Middle East ramps up, markets will start to fear a much bigger problem, which is Iran’s capacity to block the Strait of Hormuz, a critical shipping route in the Middle East.
About 20 million barrels of oil passes through the major route each day, accounting for a staggering 30 per cent of the world’s oil trade.
Iran exports 1.56million barrels of oil per day, mainly to China. Pictured is Isfahan Refinery, one of the largest refineries in Iran
‘If all of Iran’s export capacity was damaged and they couldn’t export, why would they stand back from blocking the Strait of Hormuz, why should everyone else have oil income,’ warned Bjarne Schieldrop, chief commodities analyst at SEB.
‘That would be a worst-case scenario, but then the oil price would go ballistic.’
The news comes as America deploys more of its naval fleet to the Mediterranean and Middle East region as tensions continue to flare.
President Joe Biden said the US was fully behind Israel, adding: ‘Make no mistake, the United States is fully, fully, fully supportive of Israel.’
Two American warships were used in the effort to defend Israel from Iran’s bombardment, with the USS Bulkeley and USS Cole firing ‘approximately a dozen interceptors against the incoming Iranian missiles’, US officials confirmed.
America already has a number of major naval battle groups stationed in the region, with the USS Abraham Lincoln carrier strike group in the Gulf of Oman, south of Iran, the USS Wasp amphibious assault group in the Mediterranean, as well as a number of Arleigh Burke-class guided-missile destroyers in the Med and Red Sea.
The USS Harry S Truman aircraft carrier is steaming across the Atlantic with Arleigh Burke-class guided-missile destroyers USS Jason Dunham and USS Stout and guided-missile cruiser USS Gettysburg and is expected to arrive in the region soon.
While Britain has £1bn Type 45 warship HMS Duncan, which is touted as one of the most advanced air defence destroyers in the world, is currently in Cyprus – a key staging point for UK forces in the Middle East region.
Pictured is the location of US and British warship in the Middle East which could be used to defend Iran and respond to any threat on the Strait of Hormuz
A woman carries a cat past a destroyed building at the site of an overnight Israeli airstrike in Beirut’s southern suburb of Shayyah on October 2 as the conflict continues to explode
All of these warships could be critical in helping to defend the Strait of Hormuz from any potential Iranian counter-strike, should Tehran’s oil facilities be targeted by Israel.
Speaking of the potential impact to fuel prices, Fawad Razaqzada, analyst at City Index, told The Sun: ‘The extent of Israel’s response to Iran will influence how much geopolitical risk markets factor in. Crude oil could rise another $5 in the next few days if we see further escalation in the conflict.’
David Oxley, of Capital Economics, warned such an increase could add 13p to the cost of a litre.