THE Crude oil market experienced jitters on Friday, amidst growing tensions between the United States, US and Iran following a U.S. airstrike in Baghdad that killed the head of Iran’s elite Quds Force, Qassem Soleimani, an act capable of disrupting global oil production and supplies.

Global crude oil prices experienced a 3 per cent increase after the US confirmed the killing of Iran’s top military commander Qassem Soleimani, but US oil inventories settled for a draw which raises concerns on global oil supply risks.

Crude oil inventories are the amount of crude oil stored by a country, an increase reflects greater supply or weaker demand while a decrease implies either weaker supply or greater demand but an oil inventory draw indicates a slight increase in crude oil prices.

Brent crude, Nigeria’s oil benchmark equivalent increased by $2.35 to settle at $68.14 per barrel while Western Texas Intermediate, WTI, US crude type went up by $1.87 to close for the week at $63.05 per barrel.

The surge in crude oil price for Brent crude hit its peak since September 17 and WTI’s price settled for an eight-month high since May 2019.

Analysts project that a large scale conflict in the Middle East region could likely impact the market trends of global crude oil supplies and economic development in the region.

Jason Tuvey, a senior emerging-markets economist at Capital Economics, predicts that escalation of tensions in the region could wipe out o.5 per of global Gross Development Product, GDP.

“A US-Iran war could shave 0.5 per cent or more of global GDP, mainly due to a collapse in Iran’s economy, but also due to the impact from a surge in oil prices,” he said.

The effects on other Middle Eastern and African countries “would ultimately depend on whether they get directly caught up in the conflict,” he stated.

Iran could retaliate against the US by closing off the Strait of Hormuz, a move that could drive oil prices higher around the world, as analysts suggest it could affect emerging markets. Attacks on ships in the region last year caused temporary fluctuations in crude oil prices.

According to the US Energy Information Administration, it described the Strait of Hormuz, as the world’s most important strategic chokepoints by volume of oil transit.

Though, previous cases of geopolitical tensions that affect crude oil prices swiftly are usually shortlived according to Mark Haefele, UBS Investment Bank global chief investment officer.

“Individual geopolitical risks tend not to be sufficient to drive a sustained downturn in markets, and it is important for investors to retain a long-term focus, in line with their broader financial plan,” he said

He urged investors to hold steady and not allow commentary around the Thursday attack to shift their strategies, stating crude oil price increase from crises of this sort is temporary.

On Saturday, US President Donald Trump threatened to target 52 Iranian sites if Tehran retaliates for the Soleimani strike in a tweet.

https://twitter.com/realDonaldTrump/status/1213593975732527112?s=20

“Let this serve as a WARNING that if Iran strikes any Americans or American assets, we have targeted 52 Iranian sites (representing the 52 American hostages taken by Iran many years ago), some at a very high level & important to Iran & the Iranian culture, and those targets, and Iran itself, WILL BE HIT VERY FAST AND VERY HARD,” Trump tweeted.

The threats between the US and Iran started after major attacks in September 2019 on Saudi oil infrastructure and a number of tanker-related incidents in the Strait of Hormuz chokepoint last year, which have raised geopolitical risks in the world’s biggest oil-producing basin.

In another development, the Iraqi Parliament voted on Sunday to expel the US military from the country, which is not expected to have an immediate oil supply impact. The law would not take effect until after ratification and one-year notice but Iraq will have to keep crude production flowing with or without a US military presence.

Abdullah bin Hamad al-Attiyah, former OPEC president and previously Qatar’s longest-serving energy minister said in an interview saying Iraq’s move would not affect oil supplies in the region.

“It won’t affect the oil supply from the region but the real impact will be psychological. It will bring the speculators back to the oil market,” he said.