We expect another round of military activity between Israel and Iran in the next couple of months. There are several possible triggers, some could accelerate conflict, others could delay it, but the phrase I keep hearing is “unfinished business.” Israel was not satisfied with the outcome of June’s fighting. Yes, significant infrastructure, especially energy infrastructure, was damaged, but militarily, Netanyahu is not as content as he suggests publicly. His statements are partly aimed at reassuring Trump that the matter is closed for now, but that isn’t the case behind the scenes. We think the next round of confrontation will be smaller, more contained, and likely carried out by Israel alone. It wouldn’t be on the same scale as June. Israel was so effective in undermining Iran’s defenses, that it doesn’t need to go as big again.
Shipping traffic through the Gulf has resumed without problems. But we are seeing increased activity in the Red Sea from the Houthis. Just last week they fired a ballistic missile at an Israeli-affiliated tanker. The vessel wasn’t damaged, but the attack was claimed. Another tanker was targeted yesterday. What’s notable is that the first strike happened off the coast of Yanbu, much further north than the Houthis typically operate. Meanwhile, movements through the Suez Canal are still only about 20% of normal levels, but that’s been consistent since early this year. Now, with this shift in Houthi tactics, we think it’s turning into a trend that could pose operational challenges. If it continues, we may see a further decline in Suez traffic.
How serious is the intention by IOCs to venture back into Libya?
Over the past nine months or so, we’ve seen an improvement in Libya’s political and security environment. Yes, there are still two governments, Tripoli and Benghazi, and they’re not allies. But they’ve reached some agreements that have lowered the political temperature and reduced instability. That environment has encouraged IOCs to reconsider re-engagement. Libya’s potential has always been significant, yet it has disappointed for nearly a decade. Now, companies see an opening. Geopolitics plays a role too. Italy, under Prime Minister Meloni, has been very proactive in reestablishing ties with Libya. That’s partly to manage migration flows, but also to secure energy supplies. The Italians are positioning themselves as first movers, supporting stabilization efforts while edging out Spain and France in the process.