Tensions between the United States and Iran have spread to commodity markets, including the crude oil market, increasing pressure on international crude oil supplies. If this continues for a long time, it will affect the acceleration of global economic growth.

The situation changed abruptly

The us airstrike on Baghdad airport killed senior Iranian general qassim suleimani and deputy commander of Iraqi shi 'ite militia "people's mobilization organization" ABU mahdi al-muhandiz, triggering tension in the gulf region.

US President Donald trump said in a tweet on Tuesday that if Iran attacked americans and us assets, the us would strike 52 Iranian targets, including those "vital to Iran and Iranian culture".

Iran's supreme leader, ayatollah ali khamenei, later issued a statement saying his country would take "tough revenge" for the incident. Iraq's national assembly passed a resolution to end the presence of foreign troops at a special session Tuesday.

The Iranian government announced Tuesday that it was entering the final phase of the fifth and final phase of its suspension of the nuclear deal with Iran, and that it would abandon the last key limitation of the agreement, namely "the limit on the number of centrifuges". Several Iranian media outlets quoted a government statement saying Iran's nuclear program will no longer be subject to any practical restrictions, including the level and purity of uranium enrichment, the amount of enriched material and research and development activities, and will proceed according to its own technical requirements. It says Iran will continue to cooperate with the international atomic energy agency. If sanctions are lifted and Iran's economic interests are safeguarded, Iran will be ready to renew its commitments under the nuclear deal. In response to the unilateral withdrawal of the us from the Iran nuclear deal, Iran has suspended the implementation of some provisions of the Iran nuclear deal in four phases since May 2019, including limits on Iran's uranium enrichment and heavy water reserves, as well as limits on its uranium enrichment.

After the event, the financial market fluctuated greatly. Gulf stock markets fell Friday afternoon, led by Kuwait. Kuwait's index was the best performer in the region in 2019, falling nearly 4.1 percent Friday. Sovereign debt benefited from safe-haven buying, with 10-year Treasury yields falling to 1.769%, down 10 basis points on Friday. In commodities, spot gold rose 1.5 per cent to $1,579.55 an ounce, hitting its highest level since April 2013. Crude oil prices rose Friday to their highest level in more than three months as international markets expressed concern that conflict in the region could lead to supply disruptions.

Pressure on crude oil supply

The Middle East is a major supplier of crude oil, accounting for nearly half of global production and one-fifth of global oil shipments through the strait of hormuz. While the attack did not target any oil production, the news raised concerns that conflict in the Middle East could disrupt oil supplies.

On January 6th international oil prices rose a further 2%, pushing brent crude above $70 a barrel. U.S. crude oil futures also rose more than 2 percent.

"The risk of further escalation has clearly increased," Reuters quoted Shane Oliver, chief analyst at amp capital, as saying in an analysis.

"The biggest uncertainty facing the market right now is how Iran will react to the airstrikes." ING analysts said in a report.

While U.S. sanctions have led to a sharp drop in Iranian oil exports, other major oil producers, including Saudi Arabia, Kuwait, Iraq and the united Arab emirates, are concentrated in the Persian gulf. The New York times article says whatever action Iran takes could affect these vital oil supplies, driving up prices.

The situation in Iraq was further complicated by Iraq's announcement that it would expel foreign troops from the country in the wake of the u.s.-iraq conflict, bringing the conflict between the United States and Iraq into the open. According to CNBC, Iraq is Opec's second largest oil producer, producing 460,000 barrels a day in December 2019.

The Reuters report said military confrontation or increased tensions could disrupt oil shipments through the strait of hormuz. Such a disruption, even in the short term, could affect the us and many countries around the world. 'there will be retaliation, maybe not all at once,' said livell jacobs, head of oil matrix consulting, in a note to investors. But before we do, we need to raise the geopolitical risk premium.

Opec output has been reported to have fallen further, by 90,000 barrels a day overall, following the decision of Opec and non-opec producers to increase production cuts in 2019 to support oil prices. Analysts expect Opec production to fall further until at least March 2020, and a growing number of signals point to the risk of a further slowdown in U.S. production growth, increasing supply pressure in the crude market.

Ripple through the global economy

The Washington post described the attack as a serious escalation of tensions between Iran and the United States, and one that has gripped the region. Der spiegel, a German weekly, argues that an escalation is inevitable. Analysts worry that if oil prices continue to rise, they could push up the cost of gasoline and heating fuel, as well as electricity prices, potentially dragging down the world economy at a time when global growth is already slowing. The Associated Press reported that the airline industry is sensitive to the rise in oil prices caused by the incident. Lufthansa's shares are down about 7 percent, while American airlines shares are down 4 percent.

Given the current escalation of tensions between the United States and Iran, European countries have been engaged in mediation activities to avoid causing more damage. The European Union has invited Iranian foreign minister mohammad javad zarif to the eu headquarters in Brussels to discuss the situation in the Middle East and the comprehensive agreement on the Iranian nuclear issue in a bid to avoid escalating tensions in the Middle East, the European Union said in a statement on Tuesday. French President Emmanuel macron and U.S. President Donald trump have spoken over the phone about tensions in the Middle East, the French presidential palace said in a press release on Tuesday. Mr. Macron told Mr. Trump of France's concern about rising tensions in Iraq and the Middle East. Macron said France hopes to work with all parties in the region and the international community to ease tensions in the Middle East. Germany has also proposed bringing forward a meeting of eu foreign ministers to come up with a quick response.

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