US Defense Guarantees to Saudi Arabia Amid Potential Iranian Threats
Israel's Retaliation Strike and US Involvement
Analysts from Wall Street have been concerned about the extent of Israel's planned retaliation strike following Iran's large-scale missile attack on October 1. The retaliation could possibly involve F-35 stealth fighter jets targeting Iran's nuclear facilities, missile sites, and oil infrastructure. However, the geopolitical risk premium for Brent crude has decreased in recent weeks as US Secretary of State Antony Blinken has been working to ensure that Israeli Defense Force (IDF) jets refrain from striking Iran until after the US presidential elections.
Israel's Possible Retaliation Options
Israel has reportedly contemplated a range of retaliatory actions. These could include fighter jets striking high-value military targets of the Islamic Revolutionary Guard Corps (IRGC), as well as Iran's leadership, financial networks, oil infrastructure, and nuclear program sites.
About a week ago, Axios reported a leak of a highly classified US intelligence report that revealed new details about Israel's retaliation plans against Iran. This leak has delayed the IDF's strike.
Israel's Strategic Move
The most strategic move for the IDF would be to dismantle the IRGC's command and control networks and centers by targeting key officials, missile sites, and financial networks. This would also involve paralyzing Tehran's ability to export crude via dark tanker fleets to China, a significant source of revenue. All of this would need to be accomplished while avoiding a humanitarian crisis, a task that poses a significant challenge for Israel.
Iran's Potential Response
Following an IDF strike on Iran, it is likely that the IRGC will respond in a tit-for-tat effort. Scott Modell, CEO at Rapidan Energy Advisors, noted that despite the Iranian Foreign Minister's ongoing diplomatic efforts in the Gulf, Iran will likely have no choice but to retaliate against Gulf energy infrastructure once Iran's own energy facilities come under attack.
US Defense Guarantees to Saudi Arabia
Bloomberg reported on Friday that sources familiar with the matter have indicated that officials from the Biden administration have signaled to Saudi Arabia that they are ready to defend the Kingdom against any potential attack by Iran or its proxies.
The Vulnerability of Saudi Arabia
The vulnerability of Saudi Arabia was demonstrated by Iran in its drone and missile attacks at Abqaiq, the world's largest crude oil stabilization plant, and Khurais in Saudi Arabia in 2019. These attacks temporarily shut down 5% of the global oil supply.
The Risk of Conflict Escalation
There is a significant risk that the next phase of the conflict could see the IRGC striking oil assets in Saudi Arabia or causing disruptions in the Strait of Hormuz, a crucial maritime chokepoint. This could be an attempt to weaponize crude oil markets against the West and trigger a financial shock.
Bottom Line
The geopolitical landscape is fraught with tension and uncertainty as potential retaliation strikes and counterstrikes between Israel and Iran loom. The US's role in this conflict, particularly its defense guarantees to Saudi Arabia, further complicates the situation. The potential for escalation and its potential impact on global oil markets and economies is a cause for concern. What are your thoughts on this matter? Feel free to share this article with your friends and discuss. Don't forget to sign up for the Daily Briefing, which is available every day at 6pm.
