After a murderous rampage in Paris, the Islamic State in Syria (ISIS) was hit by French and U.S. airstrikes, with U.S. A-10 Thunderbolt fighters and AC-130 gunships specifically hunting oil trucks.

Military action followed the Nov. 13 attacks in Paris that left more than 120 people dead and hundreds more wounded. The oil trucks were aimed at smugglers that provide ISIS with money for oil.

After the reprisals, the question now is how far the repercussions will spread.

The U.S. has 50 Special Forces personnel deployed in Syria to battle ISIS. But many are wondering whether an escalation in the conflict—from the air or with ground forces—will destabilize the region further.

Several Congressional Republicans have called for a sharp military response. Sens. Lindsey Graham and John McCain want a regional response with an army of 100,000 troops that would include 10,000 U.S. soldiers.

President Barack Obama rejected that strategy, instead saying his plan to assist Syrian forces by targeting ISIS financially and killing high-value targets will work in time.

But the question of war was being weighed Nov. 16 and with it the industry’s long oversupplied oil market.

A Small Effect

In Europe, the Paris attack may have a “small negative effect on European [oil] demand if border controls end up reducing intra-EU travel,” Raymond James analysts said.

“The more critical question is whether the attacks will spur a robust military response against the so-called Islamic State, and whether such a response will lead to oil supply disruptions,” the analysts said.

Observers were divided, with some saying military conflict is inevitable and others seeing the attack and response as isolated events.

For world oil production, the conflict with ISIS over the past two years has had little impact. Syria itself is not a significant oil producer and the vast majority of Iraqi oil production—about 3 million barrels per day (MMbbl/d) out of 4 MMbbl/d—is located in the south, hundreds of miles away from the fighting, Raymond James said.

“Most of the remaining output comes from Iraqi Kurdistan, which is close to the frontline but well defended by Kurdish forces with allied air support,” the Raymond James report said.

However, disruptions could occur if an all-out ground assault launches into ISIS-controlled territory.

“Such a war would not deliberately target oil fields that are in friendly hands, but—as had been the case during the 2003 invasion of Iraq and the 2011 war in Libya—all-out combat tends to leave collateral damage when it comes to oil industry infrastructure,” the firm said.

Ed Hirs, an energy economist and lecturer at the University of Houston, said the attacks and Western response will have “zero impact” on the world’s oil supply and production in the Middle East.

“It’s a horrible thing. It’s an awful attack. It’s a terrorist attack,” Hirs said. But, “It’s not a military attack. It was not an attack on oil production. It was not Iraq invading Kuwait. … It will have no impact on the world crude market.”

But Bill Herbert, co-head of research at Simmons & Co. International, said a greater level of regional turmoil seems inevitable.

“Increased military conflict in the region now is preordained and it would seem that the optionality for further regional destabilization has increased,” Herbert said in a Nov. 16 report. “Further, one would think that the cost of capital for regional energy investment will move higher as well given the destabilization.”

After a war weary public wanted government to turn to domestic concerns after the Iraq conflict, the relative state of disengagement and illusion of isolationism “was always a deferred investment/commitment,” he said.

Strategy

Part of the strategy for crippling ISIS has been to hit its pocketbook—oil.

In remarks given Nov. 14 in Vienna, Austria, Russian Foreign Minister Sergey Lavrov spoke alongside U.S. Secretary of State John Kerry about so-called rumors concerning Syrian President Bashar Hammar al-Assad, ISIS and their oil trade.

“We all know these oil fields very well and who’s responsible for them, who produces oil, and where this oil is sent in Syria and outside of Syria in the region,” Lavrov said. He then referred to the U.N. Security Council resolution which mandates that all countries break connections with this oil trade and report violations to the UN Security Council. “The U.S.-led coalition against ISIS can put an end to this illegal oil trade.

Kerry added that focus remains on the oil.

“It has moved in unwanted directions inappropriately. And we are focused on that,” Kerry said.

His words came a few days before news that U.S. warplanes destroyed 116 oil trucks in an attack near the eastern Syrian city of Deir al-Zour, which is controlled by the Islamic State. Citing officials familiar with the operation, The New York Times said the strike was planned before the Paris attacks.

While the strike and any future response could impact the revenue stream of ISIS and the recipients of the crude it produces in Syria, the fallout is not expected to have much of an impact of the global oil markets, including production.

Oil production in the war-torn country—where the European Union, the U.S. and others imposed sanctions that prompted the exodus of IOCs and NOCs alike—has been falling since 2011. U.S. Energy Information Administration (EIA) figures show oil production has dropped from an average of more than 400,000 barrels per day (bbl/d) between 2008 and 2010 to less than 25,000 bbl/d in May 2015.

“Possession of Syria’s largest producing fields including the Deir-ez-Zour region—which includes Syria's largest field, Omar—has fallen to ISIS,” the EIA said. “The exact level of current production from these fields is unknown, but U.S.-led airstrikes have certainly caused structural damage in the region and have limited its output.”

The world’s oil supply still outpaces demand as geopolitical tension rises.

As of about 2:10 p.m. Monday, a barrel of Brent crude was $44.62/bbl, up .34%; while, a barrel of West Texas Intermediate (WTI) crude was $41.76/bbl, up 2.5%, on the New York Mercantile Exchange. The WTI increase marked a reversal of last week’s losing streak.

Contact the authors, Velda Addison and Darren Barbee, at vaddison@hartenergy.com and dbarbee@hartenergy.com.