Qassem Soleimani, the head of Iran’s elite Quds military force and one of the most powerful figures in the Islamic Republic, was killed Thursday night in an airstrike in Baghdad, the U.S. Defense Department confirmed. The death of such a powerful figure in the Iranian landscape raises questions about instability in a region which supplies about 25 percent of the world’s oil. Brent Oil, the international benchmark of crude, surged to nearly $70 a barrel (an increase of 4 percent) whereas West Texas Intermediate, the American oil benchmark for crude, also rose about 4 percent, to nearly $64 a barrel. This is the largest price increase since the attack on a major Saudi oil processing plant back in September.
Although the attack did not target any oil production, the main concern moving the market upward, is the retaliation of a region littered with oil fields. Oil producers that surround the Persian Gulf include, Saudi Arabia, Kuwait, Iraq, Qatar and the United Arab Emirates. “As Iraq is one of the world’s biggest producers of oil and a key member of OPEC, this will likely impact prices going forward, which although will not undo the hard work of OPEC throughout the year, it will certainly require investors to remain cautious for the foreseeable future,” Mihir Kapadia (chief executive of Sun Global Investments) said.
It remains to be seen how Iran will respond. Thousands of protesters have lined the streets in Iran stating “U.S. Crimes” raising concerns of a bigger conflict between the two countries that could disrupt energy production in the region. The biggest fear being an attack on assets of the U.S. and their allies in the Middle East. Iran has vowed to retaliate against the U.S., but when and where will remain to be seen. With crucial oil supplies and a chance of higher oil prices, tensions between the U.S. and Iran will have a big impact on the energy market going forward.