Looming Response To Iranian Attack On Israel Poses Small Risk To U.S. Oil Market, Oklahoma Experts Say

Israel is expected to respond after Iran launched a series of ballistic missiles on Tuesday.

The attack follows a series of escalations, leading the United States and allies to expect Israel to strike back but with no certainty of when or what will be the target.

But, the White House speculated Iran's oil facilities could fall within Israel's target. On Friday, President Biden discouraged the idea.

“If I were in their shoes, I'd be thinking about other alternatives,” Biden said.

Oil markets have already shifted in a preemptive response to the lingering question of what comes next in the conflict.

“It's now expanding into other areas, Syria and Yemen, as well as we have a future of an Israeli attack on Iran,” said Joshua Landis, who is the Director at the Center for Middle East Studies at the University of Oklahoma. 

“And we don't know whether that's going to be oil. Oil futures went up 5%, which means a lot to Oklahomans. I'm sure they're very happy because of that. But, it also could suck America into a regional war.”

While crude oil has trended higher this week, it's not likely to cause noticeable or immediate differences in the U.S. market, according to Oklahoma economist Steve Agee.

“It won't have much material impact on Oklahoma or Oklahoma oil production unless it affects the world oil price,” Agee said. “And to the extent it does, we're all going to be impacted somewhat by that, but it won't be a significant impact in my opinion.”

Iran produces about 4% of the world's oil supply, Agee said. Most of what it produces stays in Iran or goes to China.

While a possible disruption in Iran's supply could theoretically pose an opportunity for Oklahoma oil producers, countries like Saudi Arabia or the United Arab Emirates would likely have plans to fill the deficit.

“We have ramped up, and we have the ability to ramp up more oil production,” Agee said. “And to the extent there is a cut in supply, the U.S. producers would probably drill more.”