Iran Strike Threat Hangs Over Inflation-Focused Oil Markets

German airline Lufthansa canceled flights to Tehran, and Russia advised its citizens not to travel to the Middle East on Thursday as Israel prepares for what it sees as an imminent attack in retaliation for the leveling of its embassy in Syria on April 1, Russian and Western news agencies reported. 

On the first day of the month, an airstrike on the Iranian embassy compound in the Syrian capital of Damascus leveled a building and killed a top Iranian general and six other diplomats. Iran blamed the attack on Israel, which has not declared responsibility. 

Last weekend, Lufthansa and Austrian Airlines, a Lufthansa subsidiary, canceled flights from Frankfurt to Tehran over security concerns, and on Wednesday announced they would extend that cancellation most likely until April 13, while Austria will continue flights from Vienna to Tehran, avoiding any situations in which crew have to spent the night. Lufthansa and Austrian Airlines are the only Western airlines servicing Tehran. 

On Thursday, Moscow advised Russian citizens against traveling to the Middle East, particularly to Israel, Lebanon and the Palestinian territories. The general consensus in the region is that an attack is imminent, with Iran’s Supreme Leader, Ayatollah Ali Khamenei, on Wednesday tweeting that Israel “must be punished” for the leveling of the embassy in Damascus. That threat prompted a warning tweet from Israeli Foreign Minister Israel Katz against any attacks on Israeli territory, which would be met with direct attacks inside Iran. 

There is frequent high-level rhetoric of this nature between Iran and Israel; however, Israel considers that in this case, the Iranian leadership is united and the Supreme Leader has effectively ordered an attack via X (formerly Twitter). 

According to the Times of Israel, during Friday prayers last week, Iran’s top imam called on the Supreme Leader to cancel the attack order and instead focus on building a nuclear bomb. 

Oil markets have not visibly responded to the threat hanging over the Middle East, with Brent crude and West Texas Intermediate (WTI) trading down over 1% at 11:00 a.m. ET on Wednesday on inflation concerns that have led to speculation that the Federal Reserve may not implement a June rate cut.

By Charles Kennedy for Oilprice.com

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