Growing conflict between Israel and Iran is causing concerns about disruptions to electric vehicle (EV) supply chains. The tensions are pushing oil prices higher and raising shipping costs. These changes could affect the availability and cost of battery materials and alter shipping routes.
The conflict between Israel and Iran is no longer just a geopolitical issue. It now threatens to impact global supply chains, especially those connected to oil shipping routes and energy markets.
Oil markets tend to react quickly to events in the Middle East. This means any uncertainty or disruption in the region could quickly affect the transportation and materials needed to make EVs.
Oil Price Surge Hits Global Transport and Energy
The Israeli military recently confirmed it launched an attack inside Iranian territory. Israeli officials said this “preemptive” strike was a response to Iran’s nuclear program.
On the same day, the price of Brent crude oil, a global benchmark, jumped more than 10% to $73.12 per barrel. This was the highest price since January.
West Texas Intermediate (WTI) crude, which is traded in the U.S., also rose to $73.20 per barrel.
Brent crude sets the price for about two-thirds of the world’s oil trade. It represents a mix of six crude oils from Europe and the U.S., and it helps set prices for exports from the Middle East, Africa, and other regions.
Any instability in this area often causes global energy prices to rise. The sudden increase in Brent crude raised concerns about higher shipping costs. This is important for EV makers, who depend on complex global supply chains.
Shipping minerals like lithium, cobalt, and nickel for batteries uses a lot of energy. When fuel prices rise, shipping costs go up, making these minerals more expensive to transport.
Vandana Hari, CEO of Vanda Insights, told the BBC, “This is an explosive situation, but it could calm down quickly, as we saw last year when Israel and Iran struck each other but did not escalate to a larger conflict.”
She added, “However, there is a risk it could lead to a bigger war that disrupts oil supplies from the Middle East.”
Markets Respond to Rising Risks
The stock markets reacted sharply to the news. The FTSE 100 index in the UK fell 0.6% after reaching a record high the day before.
In Asia, Japan’s Nikkei dropped 1.3%, South Korea’s Kospi fell 1.1%, and Hong Kong’s Hang Seng lost 0.8%.
European markets in Germany, France, Italy, and Spain fell by more than 1%. Futures for U.S. stocks also suggested further declines.
Allen Good, Director of Equity Research at Morningstar, said, “If the conflict does not escalate into a wider war, today’s price jump will likely be a short-term reaction.”
He explained, “Oil supplies remain adequate as OPEC plans to increase production, and demand is softening. U.S. oil production has slowed but could increase if high prices continue.”
