Iran Conflict Latest Developments: IEA Warns War Could Trigger an "Extremely Serious" Oil Crisis

Investing.com - On Monday, there are little signs of easing in the Iran conflict, with media reports that Tehran has experienced a new wave of attacks, causing power outages in parts of the capital.

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According to The New York Times, the joint operations between Israel and the United States have now entered their fourth week. Israel has stated it will target Iran’s infrastructure but has not provided further details.

For financial markets, it remains crucial that concerns over a long-term closure of the Strait of Hormuz persist. The Strait of Hormuz, a narrow waterway in southern Iran, accounts for about one-fifth of the world’s oil exports. Due to fears of Iranian attacks on ships, the strait has effectively been closed to tanker traffic, restricting global supply and driving up energy prices worldwide.

The Wall Street Journal reports that, besides the strait, at least 40 energy assets in the Middle East have been severely damaged in the conflict.

There is widespread concern that an energy shock could trigger inflationary pressures, slow economic activity, and lead central banks around the world to consider more hawkish policies. The Executive Director of the International Energy Agency warned that soaring oil prices represent an “extremely serious” crisis, more severe than the shocks of the 1970s.

U.S. President Donald Trump faces increasing domestic pressure to act. He has issued an ultimatum to Iran, demanding the reopening of the strait by Monday night, or else he will carry out airstrikes on the country’s power plants. Tehran has rejected this ultimatum, stating that if these facilities are attacked, the strait will remain “completely closed.”

While Trump has hinted that the U.S. could “destroy” various Iranian power facilities, he claims that the U.S. has already “won” the conflict and may be close to “ending” its military operations.

Analysts at Vital Knowledge wrote in a report: “Trump’s statement that ‘we’ve won’ isn’t wrong, especially considering the growing economic impacts of the war and Congress’s resistance to a supplemental $200 billion funding request. That’s why he seems to be shifting toward the exit ramp (or at least has turned on his turn signal, ready to make a turn).”

“However, the Pentagon does not have full control of the situation. Despite Iran’s significant weakening, it still possesses powerful retaliatory tools, especially targeting key Middle Eastern shipping routes.”

On Monday, oil prices continued to rise, and U.S. Treasury yields climbed. Asian and European stock markets declined, and U.S. stock futures also fell. Gold prices declined partly due to a strengthening dollar.

(This is developing news. Please check back later for updates.)

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