Dan Yergin of S&P warns that the global economy is in a 'dangerous time' due to the escalating tensions in the Middle East.

• Daniel Yergin, S&P Global's vice chairman, stated that the global economy is facing a "dangerous time" due to the ongoing tensions in the Middle East.
• According to Yergin, Israeli retaliation will not be a simple repetition of the events from last April, but will instead be much more intense.

Daniel Yergin, S&P Global's vice chairman, stated that the global economy is facing a "dangerous time" due to the ongoing tensions in the Middle East.

The Israel-Hamas conflict has had little impact on the oil market, with prices remaining low due to increased U.S. production and weak demand from China. However, this is changing as oil prices rose last week due to fears that Israel may target Iran's oil industry in response to Tehran's ballistic missile attack, causing concerns about a potential threat to supply.

U.S. President Joe Biden stated during a White House press briefing last week that the Israelis have not yet decided on a course of action regarding a strike, and that this topic is still being discussed. Additionally, Biden advised Israel against attacking Iranian oil facilities.

This week, both oil benchmarks experienced their largest weekly increase since March 2023. During Asia trading on Tuesday, global benchmark Brent fell 1.77% to $79.50 a barrel, while U.S. West Texas Intermediate traded 1.83% lower at $75.77 per barrel.

According to Yergin, Israeli retaliation will not be a simple repetition of the events from last April, but will instead be much more intense.

In April, a conflict arose between Iran and Israel, but they managed to prevent a complete war. As a response to an attack on an Iranian diplomatic facility in Syria, Iran launched hundreds of ballistic missiles and drones at Israel.

Yergin stated that the global economy is at a critical juncture due to the tensions in the Middle East, which could lead to another supply shock.

He stated that it's a highly perilous period, unlike any other we've experienced.

Through the lens of the Israelis, the possibility of Iranians having operational nuclear weapons is certainly in the backdrop, even though Yergin maintains uncertainty about it.

According to the speaker, it is believed that the Israelis will not attempt to attack the nuclear facilities at present. However, in a few months or weeks, Iran may have the capability to deliver a nuclear weapon, which increases the stakes. This situation is being compared to the 1962 Cuban Missile Crisis.

Pavel Molchanov, managing director of Raymond James, stated that Israel is more concerned about Iran's nuclear facilities than its oil industry. According to Iran Watch, a website published by the Wisconsin Project on Nuclear Arms Control, Iran's nuclear program has advanced to a stage where it could potentially enrich enough uranium for five fission weapons in approximately one week.

A blockade of the Strait of Hormuz by Iran is the worst-case scenario, and it is not connected to Israeli airstrikes or missiles.

The strait, situated between Oman and Iran, is a crucial waterway that facilitates the daily flow of approximately one-fifth of global oil production, as per the U.S. Energy Information Administration. This strategically important waterway connects crude producers in the Middle East with major markets worldwide.

If oil cannot pass through the strait, even temporarily, it can increase shipping costs, cause significant supply delays, and raise global energy prices, with some predicting that a worst-case scenario could cause oil prices to reach over $100 a barrel.