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Dow Jones NewsJun 13, 7:01 PM UTC
MW How Iran's response to Israel's strike could shake up global markets - in 5 scenarios
By Frances Yue
How Israel's strike on Iran could affect the global markets largely depends on the scale, nature and duration of Iran's response.
In the worst-case scenario, oil prices may surge to $120 per barrel, according to Lazard Geopolitical Advisory.
Oil prices rose on Friday, with the U.S. benchmark West Texas Intermediate crude for July delivery (CL.1) (CLN25) up 7.4%, near $73 a barrel, after climbing as high as $77.62, after Israel launched strikes on Iran's nuclear sites and military officials. Iran retaliated on Friday by launching dozens of missiles towards Israel, the Israel Defense Forces.
Stocks were sharply lower Friday, but the broader impact of the attack on global markets mostly depends on Iran's response, the analysts noted.
They put together a list of five potential response scenarios, with the most likely one being that Iran targets Israel directly, which may lead to an increase of $10 to $20 per barrel in oil prices and an higher inflation risks in the region, the Lazard analysts wrote in a Friday note.
It's also highly likely for Iran to target U.S. military or diplomatic assets in the region, which may lead to an upward swing in oil prices to $80 or $90 per barrel, according to the analysts. That posts medium to high risks to global markets, noted the analysts.
In a more severe outcome, oil prices could jump to $85-$105 per barrel if Iran attacks Gulf oil and gas infrastructure, which could lead to a rise in global inflation expectations. Such a scenario looks less likely to happen compared with the previous two, analysts said.
The worst-case scenario would be a disruption or the closure of the Strait of Hormuz.
Read: Why the Strait of Hormuz is now a major focus of worry for oil prices and the global economy
That unlikely outcome could lead to a surge in oil prices to up to $120 per barrel, potentially causing oil-driven inflation to reach crisis levels, the analysts noted. It also could cause severe disruption of the global supply chain, according to the analysts.
Still, even that scenario would most likely be short-term, as it could trigger a U.S. military intervention to reinstate the shipping lanes, noted the analysts.
-Frances Yue
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06-13-25 1501ET
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