What will happen to Spain's petrol prices amid escalating Iran-US conflict?

The world is closely watching the escalation of the conflict between Israel and Iran. In mid-June, Israel began targeting Iranian military and nuclear sites, while Iran retaliated by firing hundreds of missiles and drones back at them.

Then on Saturday June 21st ,the United States launched an unprecedented attack on Iran, bombing three nuclear sites in the Persian nation.

This is likely to have a major impact on the global energy supply. The Iranian Parliament has approved a proposal to close the Strait of Hormuz in response to the US's attacks.

The Strait of Hormuz is a maritime corridor which is crucial for the global economy. At just 30 kilometres wide, it carries one-fifth of the global oil output and 30 percent of the liquefied natural gas, which supply a large part of the world.

Iran is the world's ninth-biggest oil-producing country with around 3.3 million barrels per day. It exports just under half of that amount and consumes the rest.

The United Arab Emirates, Saudi Arabia, Kuwait and Iraq all depend on this strait to export their hydrocarbons. Also, around one in three barrels of crude oil worldwide passes through this passage, making it a critical route for international supply.

If Iran follows through on its threat and blocks the Strait, even if only partially or briefly, oil and gas prices could increase sharply.

This in turn would put financial pressure on global consumers and industry. According to El Economista, it means that oil trade would be reduced by approximately 15 percent.

Since the attacks began, the price of oil has already increased by around 5 percent. This is not because the Strait has already closed, but just due to the mere threat of it closing.

How would Spain specifically be affected? Thankfully, the country does not directly import oil from Iran, but it doesn’t mean that it will escape the fallout.

Spain depends on suppliers in countries such as Nigeria, the United States, Saudi Arabia, and Mexico, some of whom buy will be affected by the closure of the Strait.

If the Hormuz Strait is blocked, it will mean higher prices for gasoline and diesel in Spain, affecting the transportation sector and generating inflationary pressure on the economy, with widespread price increases.

Electricity could also become more expensive, given Spain’s partial dependence on natural gas and oil. In fact, Spain just like every country in Europe, would be affected by the decision.

According to Ipek Ozkardeskaya, senior analyst at Swissquote Bank. "Many remain optimistic that Iran will avoid a full-blown retaliation and regional chaos, to prevent its own oil facilities from becoming targets and to avoid a widening conflict that could hurt China - its biggest oil customer”.

But "if things get uglier" the price of US crude could even spike beyond $100 (€87.10) per barrel, she said.

Warren Patterson, head of commodity strategy at ING Research, told Spanish news agency Europa Press that this scenario increases the risk of shipping blockages and affects crude oil flows from the Persian Gulf. According to his projections, a significant disruption to these shipments could push the price of a barrel to $120 (€104.49) and if the restrictions continue toward the end of the year, it surpass the all-time highs reached in 2008.

If the price of a barrel of crude oil goes up to $150 (€130.64), petrol costs in Spain could go up to €2.20 per litre, just as it was years ago when the Spanish government gave a fuel subsidy of 20 cents per litre.

With additional reporting by AFP.