Energy Ink had intended on providing a 2020 Forecast for both oil and natural gas in this edition of our weekly e-newsletter. With it would have come the typical warning that all assumptions are predicated on an “all things being equal” analysis. That said, the assassination of Iran’s top military commander, Qassem Soleimani, by way of a U.S. military strike in Iraq on January 2nd, 2020, may make all predictions for the coming year irrelevant.
At issue is the significant potential for a Middle East in political turmoil and under the threat of military conflict through 2020. Such certainty of an uncertain future of Arab oil assets has already pushed prices up 3%.
The significance of the air strike is that it was clearly intended to eliminate Iran’s top general, whom the United States labelled a terrorist for his alleged, yet well documented, activities in serving as the “mastermind behind a strategy of backing sympathetic proxies in Yemen, Iraq, and Lebanon to secure influence and attack Iran’s enemies” according to a recent Atlantic article. That same article indicated the assumption that it was General Soleimani who was the key planner responsible for “attacks on oil tankers near the Persian Gulf, rocket volleys against American interests in Iraq, the shoot-down of an American drone, and a strike on an oil facility in Saudi Arabia.”
Any military action by the U.S. in the region would have significant ramifications for oil markets, but the fact that the target was a state official, and that he was freely travelling in a nation that did not label him as a terrorist, has created a situation of uncertainty as to both Iran’s and other Middle East nation’s response.
The Defense Department confirmed that Soleimani was killed on Trump’s orders as the President tweeted support of the attack with a single image of the American flag. The Defense Department stated as a reason for the attack that “General Soleimani was actively developing plans to attack American diplomats and service members in Iraq and throughout the region.” They further indicated that he was responsible for recent attacks on U.S. bases in the region that went virtually unreported in the mainstream press. President Trump has stated the action was taken "to stop a war, not to start one".
Iran has responded with typical threats of retaliation. Iran’s Supreme Leader Ayatollah Ali Khamenei responded that "His departure to God does not end his path or his mission, but a forceful revenge awaits the criminals who have his blood and the blood of the other martyrs last night on their hands."
Trump’s response was also typical, and pointed: "We have... targeted 52 Iranian sites, some at a very high level & important to Iran & the Iranian culture" and "if Iran strikes any Americans, or American assets... Iran itself, WILL BE HIT VERY FAST AND VERY HARD." The significance of the of targets is that it represents the 52 American hostages taken by Iran and held for 444 days in 1979.
Clearly, this act was an assassination of a state official - the first of its kind under the Trump administration in taking direct and deadly action against what is seen as the most volatile nation in the region. It is that moniker that has other nation’s uneasy about the strike, and is creating an atmosphere where further conflict will without question pock the rest of 2020. Despite predictions that oil prices will remain stagnant in 2020, further military action will most likely keep prices higher than the expected low $60’s assumed the most analysts.