This archive report was first published on 4 January 2020.
On January 3, 2020, a US airstrike in Baghdad killed Major-General Qassem Soleimani, the architect of Iran's military influence in the Middle East. The strike sparked concerns for regional tensions and crude supply disruptions, causing oil prices to surge.
According to Reuters, Brent crude rose to $69.50 a barrel, its highest since mid-September 2019, and was up 4.2 per cent or Sh300 ($2.83) a barrel at Sh70,000 ($69.08) by January 3 morning. West Texas Intermediate (WTI) crude was up $2.53 or 4.1 per cent at $63.71 a barrel, having earlier spiked to $64.09 a barrel, its highest since April 2019.
Iran's Supreme Leader Ayatollah Ali Khamenei vowed harsh revenge against the "criminals" who killed Soleimani. Analyst Henry Rome of Eurasia Group predicted moderate to low-level clashes in Iraq for at least a month, with Iran likely to resume harassment of commercial shipping in the Gulf and launch military exercises to temporarily disrupt shipping.
The US embassy in Baghdad urged all citizens to leave Iraq immediately, while dozens of US citizens working for foreign oil firms in Basra were preparing to leave the country. Iraq's Oil Ministry stated that all oilfields across the country were operating normally, with production and exports unaffected.
However, with further escalation remaining a possibility, oil markets may retain a risk premium, according to JBC Energy. Soleimani's Quds Force and its proxies in Iraq, Lebanon, and Yemen have the means to mount a multi-pronged response, including a missile and drone attack on oil installations, as seen in September 2019.
