Oil risks rise as Middle East tensions spike

The already high risk of oil supply disruption in the Middle East has risen further on the back of Iranian attacks on US assets in Iraq. Several rockets were fired overnight -- the Pentagon confirming that two US assets were targeted in retaliation for the killing of Qasem Soleimani last week.

While these targets were not oil infrastructure, markets remain rattled by the potential for further retaliation from the US -- particularly if the 52 sites that President Trump has previously identified as targets include Iranian energy facilities.

Political risk analysts at Verisk Maplecroft point out that Iran has already moved from operations aimed at demonstrating its ability to disrupt shipping through the Strait of Hormuz to the much larger-scale and highimpact attacks against Abqaiq and Khura.

Principal MENA analyst, Torbjorn Soltvedt, said that, in parallel, there is a growing risk that Iran will broaden and intensify its existing counter-pressure campaign against the US, which includes efforts to disrupt the flow of oil from the Persian Gulf.

"With oil exports reaching a new low in December 2019, the motivation for Iran to resume in 2020 would have been high irrespective of the killing of Soleimani. The killing of Soleimani will nonetheless make it more difficult to separate the many closely related, but distinct, fault lines between the US and Iran.

"Similarly, although competition between the US and Iran over influence in Iraq clearly predates the current regional crisis, there is little doubt that Iran views Iraq as one among several arenas where it can place the US under pressure in response to the Trump administration’s 'maximum pressure' campaign."

Responding to ongoing tensions, the UK's foreign secretary, Dominic Raab has called for an urgent de-escalation following an attack on Iraqi military bases.

"We condemn this attack on Iraqi military bases hosting Coalition - including British - forces. We are concerned by reports of casualties and use of ballistic missiles," he said. "We urge Iran not to repeat these reckless and dangerous attacks, and instead to pursue urgent de-escalation."

A war in the Middle East, he added, would only benefit Daesh and other terrorist groups.

Regional war risks cover

Following their meeting yesterday, meanwhile, the Joint War Committee considers the strategic maritime picture to be unchanged. While there are clearly increased tensions in the Gulf region, with American assets now referenced, it said the underlying maritime threat remains heightened amid the ongoing possibility of escalation.

"The London insurance market has been operating with these strategic factors in mind since last May and underwriters will continue to ask appropriate questions of assureds in order to ascertain the risk dynamics of individual sailings seeking war risk cover," it stated.

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