If the Islamic regime doesn’t make a deal with the Trump administration during the five-day respite of attacks on Tehran’s power plants, Israel’s annual inflation could rise from the estimated 1.7% increase to 2.5%-3%, Shahar Golomb, a lecturer in economics and finance from Afeka Academic College of Engineering, told The Jerusalem Post on Monday.
“I can say that for every $10, the price of oil rises. It will affect Israeli fuel prices at the pumps by about 20 agarot per $10 of the change. So if the prices of oil rise from 60 to 100 or to 120, we’re talking about a 60 agarot rise in the pumps, and that’s before the fuel tax,” he noted.
Golomb spoke with the Post before and after US President Donald Trump announced the five-day postponement for negotiations, which almost immediately saw the price of oil drop by more than 13%.
The United States and Iran “have had, over the last two days, very good and productive conversations regarding a complete and total resolution of our hostilities in the Middle East,” Trump wrote in a post on Truth Social. “I have instructed the Department of War to postpone any and all military strikes against Iranian power plants and energy infrastructure for five days, subject to the success of the ongoing meetings and discussions.”
On Saturday, Trump warned that Iranian power plants would be destroyed if Tehran failed to “fully open” the Strait of Hormuz, which carries one-fifth of global oil and liquefied natural gas, to all shipping within 48 hours. Trump set a deadline of around 7:44 p.m. EDT on Monday.
Two possible scenarios
Golomb described two possible scenarios arising from the current conflict. The first, which he initially said was less likely but became noticeably more optimistic about after Trump’s announcement, would see a Venezuela-adjacent situation and a positive outcome for Western and Gulf economies.
“They [the US] took Maduro out of the equation, and now Venezuela is pro-US, and everything is fine... In this case, oil prices will come down, and everything will be almost back to normal. There is some infrastructure damage already to the Gulf countries, so it will take a bit more time, but everything will come back down, and life will go on. I see it will have a very positive outcome on the stock markets, the oil prices,” he said.
The second, which he initially said was far more likely, would see oil become a casualty of the conflict, driving up prices internationally. This would start with the US either taking or destroying Iran’s Kharg Island, which handles around 90% of the country’s crude oil, and would go on to see the regime targeting oil refineries in Gulf countries far more severely than it already has in these past weeks.
“So, in that scenario, I see oil prices going up, and the US and other countries combating this situation by giving a lot of output, like from Venezuela, from the US, to the rest of the world to calm down the oil prices,” he predicted. “And then, besides the oil prices, there are commodities that are made out of in the process of making oil – for example, gas, plastic, and all these kinds of things, and it will hurt the economy, and, in the end, cause inflation. So that’s the main problem of the second scenario.”
Golomb said that a large percentage of those in Europe and the US “don’t really understand the conflict,” but will comprehend the increasing cost of living.
“People will react to the rising prices because of the oil. So, it will affect the governments. I can’t say for sure, but history says that, when there’s a public outcry, governments listen in the end,” he shared, predicting how shifting international alignments will depend on how long-term the economic consequences are felt in the West.
When asked whether this would be the final financial push needed for Western nations to fully invest in environmental, renewable alternatives, Golomb was skeptical. He said that, even with the potential long-term rise in the price of oil, environmental alternatives remained too expensive, and the alternative just did not exist for many of the products crude oil makes.
'Oil has become the new currency'
While there will undoubtedly be economic consequences for Europe, the US, and Israel, Golomb said such a move would play a role in deciding the new world order.
Under sanctions for its gross human rights violations, the Islamic Republic has been dependent on China and Russia for oil sales. Disrupting that supply chain would harm those powers.
“It’s more, it’s a global war right now, for in the perspective of oil, if you see what’s going on and what the US is doing: First of all, taking Venezuela, then Cuba, and then taking down Iran,” he theorized. “I think it’s what President Trump said at the beginning of his term, that the main enemy of the US is China, and that by seizing the production of oil around the world, Trump is taking down his enemy through economics.
“I think it’s a very interesting time for geopolitics. I think the world is changing rapidly in front of our eyes. The US was a sinking ship before that war. I think the new world order is changing and putting the US back in front,” he concluded. “Oil has become the new currency, and it depends on who has it and who doesn’t. And so, the main issue of this conflict is not the ballistic missiles or nuclear [weapons]. I think it’s all about oil in the end. And if you look at what the US is doing in the last few months or years, you can see that oil is the game.“