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Pioneer Natural Resources CEO Scott Sheffield has warned that while oil prices have given up their brief rally following Hamas’ attack on Israel over the weekend, prices could soar significantly if Iran becomes directly involved in the conflict.
“If Iran enters the war, we’re going to see much higher oil prices, obviously,” Sheffield said Wednesday on CNBC’s Squawk Box.
After gaining more than $3.50 on Monday and closing at $88.15 on Monday, October 9, Brent crude prices have now fallen to $86.63 as the market considers the regional conflict will have no immediate impact on supply.
Should the conflict widen to a point at which Iran is no longer deploying only proxy forces, Sheffield says oil prices will rise amid a threat to global crude supplies, which are already under pressure from output cuts by OPEC+ members Saudi Arabia and Russia.
Sheffield appears to place the future of an conflict-based oil price surge directly in the hands of Israeli Prime Minister Benjamin Netanyahu, saying it “depends on how much evidence he has that they’re [Iran] behind it and whether or not he decides to do anything about it”.
The death toll in both Israel and the Gaza Strip continues to rise as the conflict enters its fifth day, with a reported 3,600 people reportedly killed in clashes.
On Wednesday, AFP cited the Israeli army as saying they suspect Hezbollah has infiltrated Israeli airspace from Lebanon after Iran-backed Hezbollah fired missiles on Israel in retaliation for the killing earlier this week of three of its members. Israel has responded by striking a Hezbollah outpost in south Lebanon.
In the meantime, oil markets continue to view this as an isolated conflict that will not extend to Iran, with a New York Times report on Wednesday saying that U.S. intelligence reports indicated Iran was caught off guard by the Hamas attack on Israel.
By Charles Kennedy for Oilprice.com
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Charles is a writer for Oilprice.com