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Investors have been strained over crude oil prices since Israel launched a surprising attack on Iran 12 days ago.
How do oil prices over the past two weeks compare to what happened during and after the previous geopolitical crisis affecting the region? The lesson from history is that oil prices are rarely completely predictable.
1973: The Yom Kipper War
Egypt and Syria launched a surprising attack on Israel on October 6, 1973. This was held at Yom Kippur, the most sacred day of the Jewish calendar. Israel was counterattacked before the ceasefire officially ended the conflict 20 days later. The war was short and politically important – what impact did it have on oil prices?
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The full impact of the war on oil prices was only revealed after the organisation of the petroleum cartel, the Arab Petroleum Exporting Countries (OAPEC), imposed a crude embargo on the United States in retaliation in support of Israeli forces during the conflict. In addition to cutting oil production, the embargo has continued to raise crude oil prices for years.
1979: Iranian Shah abdicated
In February 1979, the oil-rich Iranian Shah Mohammad Reza Pallavi was wiped out of power during the Iranian revolution. He was replaced by Ayatollah Ruhola Khomeini, who took over as the supreme leader of the newly formed Islamic Republic.
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In the midst of the upheaval, oil production collapsed, causing panic across global markets. Oil buyers were concerned that the “crisis would only get worse and that a combination of religious fundamentalism and nationalism would spread to other oil-producing countries in the region,” wrote Samantha Gross, a fellow at the Brookings facility.
In the early to mid-1980s, oil prices more than doubled and rose.
1990: Kuwait’s invasion
Iraqi forces under President Saddam Hussein invaded Kuwait in August 1990, targeting the vast oil reserves of neighbors.
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The International Energy Agency said the attack, which it said several months later, “has resulted in a total disruption of 4.3 million barrels of oil per day.” Markets are threatening wider disruptions in global oil supply, fearing that conflict could spread across the region.
However, Saudi Arabia, alongside other oil producers, increased production, offsetting losses in supply from Iraq and Kuwait. This led to global oil prices returning to pre-invasion levels by early 1991.
2001: Attack on September 11th
On September 11, 2001, 19 al-Qaeda operatives hijacked four US passenger jets in a coordinated attack. Two planes flew to a New York skyscraper, the third struck the Pentagon and the fourth crash in Pennsylvania. It was one of the deadliest terrorist attacks in US history.
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“The attack on the US has caused sharp cuts in air travel, further lowering expectations for global economic growth this year and next year,” the IEA said at the time. Intergovernmental groups then reduced forecasts for global oil demand growth, with jet fuel accounting for most downward revisions.
However, by mid-2002, when it was clear that there was no major disruption in oil production, crude oil prices were trading at roughly the same level as a year ago.
2025: Israel and the US attack Iran
Again, amidst the tensions created by Israel and the US hit by Iran, the focus is on the oil market, but the world’s oil production landscape has changed since the previous crisis. How has the United States itself been working as an oil producer since the beginning of the 20th century?
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One reason often cited about the more calming response to the recent bout of geopolitical disruption of oil investors is the rise in US oil production driven by the shale boom. This has resulted in global supply reducing dependence on OPEC producers.
