Oil Prices Decline Amid Concerns Over Israel-Hamas Conflict’s Impact on Global Economy
Oil prices experienced a decline on Monday, partially reversing the gains made on Friday. Investors are closely monitoring the Israel-Hamas conflict to assess whether it will draw other countries into the conflict, potentially driving prices up and posing a fresh threat to the global economy.
Both Brent futures and U.S. West Texas Intermediate (WTI) crude recorded losses, with Brent sliding 34 cents to $90.55 per barrel and WTI dropping 41 cents to $87.28 a barrel. The previous Friday saw a significant increase in oil prices, marking the highest daily percentage gains since April. Investors factored in the possibility of a broader conflict in the Middle East region.
Hiroyuki Kikukawa, president of NS Trading, emphasized that investors are still trying to determine the impact of the conflict. He mentioned that although the prices have somewhat accounted for the potential involvement of oil-producing nations, an actual ground invasion and subsequent impact on oil supply could result in prices exceeding $100 a barrel.
The ongoing conflict, primarily between Israel and the Islamist group Hamas, presents one of the most substantial geopolitical risks to oil markets since Russia’s invasion of Ukraine last year. Market participants are concerned about a potential escalation involving Iran and its implications for oil supplies from top-producing countries, such as Saudi Arabia, Iran, and the United Arab Emirates.
Although the current conflict has had minimal effects on global oil and gas supplies, concerns about a wider conflict persist. Israel’s Prime Minister Benjamin Netanyahu has vowed to take decisive action against Hamas. Iran has warned that if Israel’s actions are not halted, the situation could spiral out of control with severe consequences.
To address the escalating tensions, U.S. Secretary of State Antony Blinken is returning to Israel for discussions on the way forward after engaging in diplomacy among Arab states.
The decline in oil prices was partly offset by the United States’ recent decision to impose sanctions on owners of tankers carrying Russian oil priced above the G7’s cap of $60 a barrel. This move aims to close loopholes in the mechanism established to punish Moscow for its invasion of Ukraine. Russia is one of the world’s leading crude exporters, and increased scrutiny of its shipments could potentially impact global supply.
In conclusion, oil prices have experienced a decline as investors closely monitor the Israel-Hamas conflict’s potential impact on the global economy. Concerns about the conflict escalating and involving other nations continue to weigh on market sentiment. The ongoing situation presents significant geopolitical risks to oil markets, particularly with implications for top-producing countries in the Middle East region. The market remains cautious as it awaits further developments and assesses the potential consequences for oil supply and prices.
