Strategy and Head of Equity Research
June 14 2019
Our view on the likelihood of an Iran war has not changed in light of reports of attacks on two oil tankers in the Gulf of Oman.
In May, after four oil tankers were damaged by explosions near Fujairah port, we listed 10 reasons why war was unlikely. The latest incident, which the US blames on Iran, supplying video footage and photographic evidence to support its claim, is certainly alarming and led to a sharp oil price spike on 13 June, but we reiterate that we do not expect full-blown war.
Any spikes in oil price (ie concerns on supply risks from GCC exporters), or sell-off in those regional (MENA) assets that are otherwise attractive (eg Dubai, Lebanon, Oman and Saudi equities), during bouts of escalation in tensions between the US and Iran should be viewed as temporary. The deployment of additional forces and the reported sabotage in May – which a recent UAE inquiry described as “highly likely” to have been caused by limpet mines – and June of commercial vessels off the coast of the UAE prompt us to lay out the reasons for this central case (and consider the counter case)...
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