Israel Attacks Iran in Syria
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Today, several senior members of Iran's Revolutionary Guard were killed in an air strike on Iran’s embassy compound in Damascus, Syria. One of those killed was Brigadier General Mohammad-Reza Zahedi, a prominent commander in Iran's Revolutionary Guard. His death was confirmed by Iran’s state news agency. Iran has accused Israel of the strike. Israel, which rarely confirms or denies military action outside its borders, issued no comment.
It is highly likely Israel undertook the strike. Over the past several months, it has undertaken strikes on numerous targets linked to Iran and its proxies in Syria and Lebanon. Iran's foreign minister, Hussein Amirabdollahian, said Israel bore responsibility for the attack on Iran’s consulate and that the attack was a violation of all international commitments and conventions. Syrian foreign minister Faisal Mekdad also condemned Israel over the attack.
There can be little doubt that the recent attack is a major escalation in the tensions between Israel and Iran. While Israel has struck many of Iran's proxies in the region, this was a direct attack against an official Iranian building flying its flag.
Over several weeks, it appeared that Iran was trying to de-escalate tensions between itself and the United States after a drone attack on a U.S. military base on the Jordan-Syrian border had killed three American troops. This direct attack by Israel on Iran may force Iran to take retaliatory actions and, as a consequence, significantly increase tensions in the region.
As expected, markets did not take this news well. Crude prices, which had already been rising over the past several weeks, gained sharply today, with WTI and Brent closing at roughly $84 and $88 per barrel, respectively. Over the coming days, all eyes will be trained on Iran, looking for its response to this attack.
For the past several months, markets had hoped that the Israel-Hamas crisis would not spill over into the larger region. To date, while there has been some regional impact (e.g., the Houthis attacking shipping through the Bab-El-Mandab), the crisis has been largely contained to Israel and Gaza.
This recent escalation is extremely concerning. Typically, in the past, Israel would not take such a major step without some notice or tacit agreement from the United States. However, with tensions between the United States and Israel growing and President Biden and Netanyahu's relationship showing signs of strain, it is difficult to see how the US would agree to such a provocative escalation in regional tensions.
Rising geopolitical risk and instability, particularly in the Middle East, do not bode well for crude oil prices. Moreover, increasing crude and petrol prices will negatively impact global growth and once again increase inflation, something the major central banks thought they had extinguished.
Consumers should expect increased volatility and pricing for the foreseeable future.
More: Market Updates, Crude Oil, Geopolitics, Iran, Israel
