Qassem Soleimani killing: Will oil become a weapon of choice for Iran?

Oil prices have been on an upward trajectory since early October and the killing of Soleimani boosted them to their highest level since April

Events in 2019 served as a reminder for just how vulnerable the world’s oil supply is, and Iran was usually blamed as the culprit for attacks on ships, pipelines and processing plants in the Middle East. But the knock-on effects blew over quickly in a world that appeared oblivious to the geopolitics of oil. Now in the wake of the US killing of Qassem Soleimani, the Iranian general who led the Revolutionary Guards’ Quds force, the big question hanging over the market is whether Iran will target oil in its response.

There is no particular reason to expect that Iran’s retaliation will target oil, except that even the best guarded of the industry’s installations have been shown to be vulnerable and the steady stream of oil tankers passing through the Strait of Hormuz presents multiple opportunities to disrupt flows. About 34 million barrels of crude from Saudi Arabia, Iraq and Kuwait was passing through the channel on their way out of the Persian Gulf and toward US ports last month, according to Bloomberg tanker tracking.

Attacks in September on Saudi Arabia’s oil processing facilities at Abqaiq and Khurais briefly took 5.7 million barrels a day of the country’s oil production capacity offline, the single biggest disruption in supply on record. It served as a wake-up call that the world’s oil security blanket — the spare production capacity that is almost uniquely held by the kingdom — was not nearly as secure as once was thought…