Article content continued

Rising tensions between the Iran and the U.S. have already caused unprecedented disruptions to oil markets, but so far they’ve been short-lived. Last year, Washington blamed Tehran for sabotage attacks on supertankers and a missile and drone attack on Saudi Arabia’s Abqaiq crude-processing plant in September — the largest single supply halt in the industry’s history.

An escalation into direct fighting between U.S. and Iranian forces in the world’s most important oil-producing region would have longer lasting consequences for the global economy.

Severe Retaliation

Iran’s Foreign Minister Javad Zarif denounced the attack on Twitter as “an act of international terrorism.” The country’s Supreme Leader Ayatollah Ali Khamenei threatened “severe retaliation.”

The Iranian leadership is signalling that it will probably target U.S. military installations and bases in the Middle East and mobilize its network of militias across the region. One official told the state broadcaster that some 36 U.S. military bases and facilities are within reach of Iran’s defence forces, with the closest being in Bahrain.

The U.S. State Department issued a directive urging American citizens to leave Iraq immediately due to the threat.

Iraq is the second-largest producer in the Organization of Petroleum Exporting Countries, pumping 4.65 million barrels a day last month. It’s immediate neighbours in the region — Saudi Arabia, Kuwait and Iran — together produce about 15 million barrels a day. Most of their exports leave the Persian Gulf through the Strait of Hormuz, a narrow waterway that Iran has repeatedly threatened to shut down if there’s a war.