The Latest Escalations In Violence From Iran’s Proxies Threatens Huge Oil Price

A series of intense military exchanges between Iranian-backed terrorist organisation Hezbollah and Israel over the weekend align with the Islamic Republic’s intention to keep pressure on Israel and its key Western allies through multiple indirect mechanisms rather than by direct action from Iran, a senior source in the European Union’s (E.U.) energy security complex exclusively told OilPrice.com.

“The incidents on Sunday [25 August] involving Hezbollah and of the previous weeks involving the Houthis stepping up attacks in the Red Sea signal the principal way in which Iran intends to retaliate for recent Israeli attacks on it and its proxies,” he said. “Using Hezbollah and Houthi to carry out such strikes puts some distance between Iran and Israel in order not to directly provoke Israel’s key sponsor, the U.S.,” he added.

“However, despite the attacks coming from Iran’s proxies rather than the sponsor itself, it may well be that the situation spirals from here, and Hezbollah has already said that its recent attacks [on Sunday] are just the first phase of its response to the assassination of its senior commander Fouad Shukr [in a strike in Beirut on 30 July] that it believes was done by Israeli forces,” he underlined.

The scale of Israel’s pre-emptive attack on Hezbollah’s Lebanese bases is the largest seen since the all-out war between Israel and Hezbollah in 2006 and a further escalation would pose much bigger problems for Tel Aviv than its ongoing war with another Iranian proxy terrorist group, Hamas.

Hezbollah is on another level entirely, with around 100,000 in its fighting force, a huge arsenal of weapons including up to 200,000 rockets and missiles, and all of this positioned directly to Israel’s north. It is also a key beneficiary of help from Iran in the training of its fighters and in the supply short-, intermediate, and long-range unguided ballistic missiles and short-range guided ballistic missiles capable of hitting all of Israel’s major population centres.

Its history of warfare against Israel stands out as uniquely successful among its Middle Eastern neighbours, having driven Israeli forces out of Lebanon in 2000 and having fought them again in 2006, that time to a stalemate.

A full mobilisation of Hezbollah against Israel, at the same time as ongoing conflict on another front against Hamas could significantly stretch Israel’s defence capabilities – even more so if augmented by aerial attacks on Israel by Iran, or by additional forces from Syria to Israel’s northeast supported by the Iranian military and its proxies.

“It is another element of threat thrown into the mix, as another war with Hezbollah could draw in other anti-Israeli fighters from across the region, encouraged by Iran or not, with all the potential for increasing involvement by the superpowers that this involves,” said the E.U. security source.

At the same time as this, it is likely that attacks against oil shipping in and around the Red Sea area are further stepped up, he thinks. Less than a week ago, the Greek tanker Sounion and another as-yet unnamed vessel were attacked, mirroring actions undertaken by naval elements of Iran’s own Islamic Revolutionary Guards Corps (IRGC) that preceded the 7 October 2023 Hamas attacks on Israel.

At the beginning of May 2023 in and around the Strait of Hormuz, Iranian forces seized two oil tankers in a week, although neither the Niovi nor the Advantage Sweet were anything directly to do with Israel. Instead, the E.U. source exclusively told OilPrice.com at the time, it was done to demonstrate that the Islamic Republic still had control over the key transit route that sees around 30 percent of the world’s oil transported through it.

As a result of those two seizures, oil and shipping insurance prices did rise, albeit temporarily, as also happened after the 19 November 2023 hijacking of the Galaxy Leader by the Houthis.
However, it was interesting to note even back then that the follow-through in the oil price was limited, despite threats from the Houthis’ spokesman, Alameed Yahya Saree, at that time that the group intended “to sink” Israeli ships in the Red Sea. The same can be said for the 21 August 2024 attacks on shipping.