The Iranian drones have yet to strike in retaliation to Israel’s attacks overnight, and this could be just the beginning of a much larger escalation. Importantly, Israel has signaled that its actions may continue for one to two more weeks. If that proves true, the potential for Iranian retaliation beyond drones and missiles increases substantially, with broader consequences for the energy market. The response of prices so far has been headline-driven – a classic geopolitical fear premium and this might be short-lived because actual supply disruptions have yet to materialize. We are now in a crucial window. If Israel halts further strikes and the situation remains relatively contained, prices may deflate back to reflect market fundamentals. But if hostilities persist or expand, oil prices could climb significantly higher, especially if regional infrastructure is endangered. Iran has halted nuclear negotiations and declared the U.S. accountable, setting a stage where even indirect escalations could ripple through the market. In the end, what determines peak pricing won’t be a one-off drone or missile, it will be whether this becomes a regional war or not.
Is there a risk to Iran’s energy facilities?
So far, no oil or nuclear energy infrastructure has been targeted or damaged. Claims about attacks on Tabriz and Abadan refineries were swiftly denied by Iran’s National Oil Company. The real threat lies in potential escalation: a blockade of the Strait of Hormuz, attacks on U.S. military installations, or sabotage of key infrastructure. But such actions would mark a significant shift, and Tehran, historically, prioritizes regime preservation above all else. Unless Iran faces an existential threat or sees direct attacks on its homeland, it is unlikely to strike energy targets that would provoke full-scale conflict.