Oil prices again rose above $100 a barrel on Tuesday after Iran denied holding talks with the US, contrary to President Donald Trump’s assertion, and sent a wave of missiles into Israel.
Trump appears to be seeking a diplomatic off-ramp after he postponed a threat to attack Iran’s power plants. Gulf nations are increasingly supporting US attacks on Iran, hoping to prevent Tehran from gaining long-term leverage over the Strait of Hormuz and don’t want to act as mediators. Speaking at CERAWeek, Sultan al-Jaber, CEO of the UAE’s state energy company ADNOC, which has curbed its oil and LNG output following strikes on its infrastructure, described Iran’s attacks in the strait as “an act of terrorism against every nation.”
The US has been relatively insulated from oil and gas flow disruptions in the Middle East compared with Europe and Asia, but analysts say the impact on the world’s largest economy is still likely to be negative, despite potential increased shale production. EY-Parthenon Chief Economist Gregory Daco put the probability of a US recession at 40% this year, adding that “those odds could rapidly rise in the event of a more prolonged or severe Middle East conflict.”