RBC Flag Middle East Inflection Points for Oil

The Middle East conflict has three main escalation pathways at present while anything impacting the Strait of Hormuz would be a clear inflection point for oil according to RBC’s Global Head of Commodity Strategy Helima Croft in an interview with CNBC.

• “The real question is, will this deter the Houthi’s?” Croft said referring to the US/UK airstrikes - “In 2016, the US did take military action against the Houthi’s [they] targeted sites in Yemen – the Houthi’s stood down.”
• “Does this expand to the Strait of Hormuz? That is the most critical waterway for oil” Croft said.
• She warned that critical Saudi energy infrastructure sites could again become Houthi targets as the situation escalates referencing the Jizan and Jedah refineries, targeted in the past.
• RBC is not anticipating that Saudi, or the UAE will join this coalition effort against the Houthis because of their own security concerns.
• Croft also highlighted that Iran seizing an oil tanker off the coast of Oman was a clear warning shot from the Iranians.
• “This tanker has a very interesting history” referring to its prior seizure by the US.
• “This war has three escalation pathways, there’s Yemen, there’s Lebanon and there is also Iraq” Helima said, which the bank was watching in the coming days.