Rosalind Evans
In the face of escalating tensions in the Middle East, oil prices have experienced fluctuations, with potential ramifications for global markets. Prices surged above $91 a barrel in response to heightened diplomatic efforts to tackle the Israel-Hamas crisis. However, as the day progressed, the prices retracted, aligning close to their levels.
The ongoing Israel-Hamas war is causing jitters amongst investors who fear a broader conflict in the oil-abundant region, which could further constrict the already taut global oil supply. Brent crude futures, the international oil benchmark, touched a high of $91.2 a barrel, slightly above the rate of $90.89, only to settle later at $90.77. Similarly, the US marker, West Texas Intermediate, peaked at $87.98 before returning to its closing price of $87.68.
This sudden jump was precipitated by warnings from Israel’s military, advising over a million individuals to evacuate northern Gaza. This advisory fueled concerns of a prospective Israeli ground assault in response to Hamas’s terror acts that claimed upwards of 1,400 lives.
In a conversation, US National Security Adviser Jake Sullivan voiced the uncertainty surrounding the situation, stating, “There is a risk of an escalation of this conflict.” Even though the threat level from Iran remained unchanged, the implications of the crisis expanding could be catastrophic.
ANZ Research analysts anticipate oil prices might reach the $100 mark shortly, driven by the burgeoning risk of regional flare-ups. While neither Israel nor Hamas majorly influence the oil supply, the potential broadening of the conflict could severely impact the oil market. The report from ANZ Research noted that if Iran were to be trapped in the conflict, “up to 20 million barrels per day of oil could be at risk of disruption directly and through obstructed logistics.”
Stephen Innes, managing partner at SPI Asset Management, commented on the precarious situation, suggesting, “The ongoing conflict could weigh even further on the global oil supply… leading to a further surge in oil prices.” Such turbulence has risen since late June, with production slashes by critical players like Saudi Arabia and Russia, coupled with recent US strategies to counteract Russia’s oil pricing, amplifying global supply concerns.
Parallelly, the Israeli shekel experienced a downturn in the currency realm, depreciating by 0.3% against the US dollar. This brought its 10-day depreciation to nearly 4%. In response, Israel’s central bank announced its intent to offload up to $30 billion of foreign exchange to buoy the shekel, which had witnessed a stark decline post the Hamas offensives.
As the Middle East simmers, oil markets are on tenterhooks, with prices oscillating in response to the unfolding geopolitical developments. The intricate interplay between international diplomacy, military strategies, and economic ramifications underscores the significance of stability in this pivotal region. Stakeholders across the globe will be keenly watching the situation, hoping for a swift resolution to prevent prolonged global economic upheaval.
