Key Takeaways:
A direct Israeli attack on Iran’s largest petrochemical complex in Mahshahr on Saturday has shut down all production, a significant escalation that targets the country's economic infrastructure and raises fears of a wider disruption to global oil supplies.
"After we destroyed 70% of its ability to create steel... today we attacked their petrochemical factories," Israeli Prime Minister Benjamin Netanyahu said in a video statement, vowing to "continue to crush the terrorist regime in Tehran."
The strikes targeted at least four facilities, including the Fajr 1 and Fajr 2 utility plants that supply power and gas to over 50 other plants in the Bandar Imam Petrochemical Complex. Iranian state media reported at least five people were killed in the attack. The complex produces 72 million tons of petrochemical products annually, according to Iran's oil ministry.
The attack is the latest in a series of intensified strikes by Israel and the U.S. on Iran's critical infrastructure and coincides with Iran's effective closure of the Strait of Hormuz, a chokepoint for about one-fifth of global oil trade. The escalation has already contributed to a second consecutive monthly rise in world food commodity prices and is pushing up mortgage rates in the U.S. as energy price volatility fuels inflation concerns.
The Israeli military confirmed the strike, stating it hit a complex “responsible for the production of chemical materials used for weapons,” including for explosives and ballistic missiles. The targeted facilities, identified by Iranian media as Fajr Petrochemical Companies 1 and 2, Rajal, and Amir Kabir, provide essential services to the entire industrial zone, which is the leading employer for the region's 300,000 residents.
According to Hamed Shams, a communications head for Iran's petrochemical industries, the targeted utility plants also play a key role in providing electricity to 500,000 people in the surrounding Khuzestan Province during the summer.
The strike on Mahshahr is part of a broader, intensifying conflict. In recent days, Israel and the U.S. have also targeted Iran’s main steel manufacturing plants, research centers, and airports, according to Iranian state media. The conflict saw a dramatic escalation when Iran shot down two U.S. military jets, the first such instance in over 20 years, and a manhunt is underway for a missing American crew member.
The war's economic consequences are rippling outward. The UN’s Food and Agriculture Organization reported that world food commodity prices rose for a second straight month in March, driven by increasing energy costs linked to the conflict.
In the United States, the fallout is clouding the outlook for the spring housing market. The average rate on a 30-year mortgage climbed to 6.46% this week, its highest in nearly seven months, as surging energy prices heightened inflation worries. "The war in Iran has seriously complicated the spring buying season," said Joel Berner, a senior economist at Realtor.com.
The last time geopolitical tensions in the region led to a comparable spike in oil prices, global equity markets saw a significant sell-off as investors moved towards safe-haven assets. With Iran-backed militias in Iraq claiming attacks on U.S. bases and Tehran vowing to open the "gates of hell" if attacks escalate, the risk of a prolonged disruption to energy supplies from the Middle East is growing.
This article is for informational purposes only and does not constitute investment advice.
