Tokyo, Oct 16 (The Street Press) – Oil prices didn’t change much on Monday, staying at a similar level to where they were last week. People are keeping a close watch to see if the conflict between Israel and Hamas involves other countries. If it does, oil prices could go up even more, which would be bad news for the world economy.
The price of Brent futures stayed steady at $90.89 per barrel at 0419 GMT, while U.S. West Texas Intermediate (WTI) crude dropped by just 2 cents to $87.67 per barrel.
On Friday, both benchmark oil prices increased by almost 6%, marking their biggest one-day gains since April. This jump was because investors were considering the chance of a larger conflict in the Middle East. For the whole week, Brent went up by 7.5%, and WTI saw a 5.9% increase.
According to Hiroyuki Kikukawa, the president of NS Trading, a unit of Nissan Securities, investors are trying to understand how the conflict will affect things. So far, a large-scale ground assault hasn’t started, even though Israel gave a 24-hour notice for residents in the northern part of Gaza to move south.
The potential impact on countries that produce oil has already influenced prices somewhat. However, if there were to be an actual ground invasion that affects oil supply, oil prices could quickly go over $100 a barrel.
The Middle East conflict hasn’t significantly affected global oil and gas supplies, mainly because Israel isn’t a major oil producer. However, the ongoing war between Hamas and Israel presents a substantial geopolitical risk for oil markets, similar to the concerns that arose during Russia’s invasion of Ukraine last year.
People in the market are carefully considering how a broader conflict might impact oil supplies from the world’s top oil-producing countries in the region, including Saudi Arabia, Iran, and the United Arab Emirates. These are important players in the global oil market.
If it’s discovered that Tehran is directly involved in the Hamas attack, there’s a likelihood that the U.S. will fully enforce its sanctions on Iran’s oil exports, according to Commonwealth Bank of Australia analyst Vivek Dhar. He mentioned in a note on Monday that the U.S. had been somewhat lenient with its sanctions on Iran’s oil exports this year in an effort to improve diplomatic relations with Iran.
This year, Iran managed to increase its oil exports by 0.5-1 million barrels per day, which is roughly 0.5-1% of the global oil supply. However, these gains could be jeopardized if the U.S. decides to enforce sanctions more rigorously.
Israel’s Prime Minister Benjamin Netanyahu expressed his determination to “demolish Hamas” on Sunday as Israeli troops readied themselves to enter the Gaza Strip in pursuit of Hamas militants responsible for deadly attacks on Israeli border towns.
Meanwhile, Iran issued a warning on Saturday, stating that if Israel’s actions, which it referred to as “war crimes and genocide,” are not halted, the situation could deteriorate further, potentially leading to significant consequences.
Amid concerns of the conflict escalating, U.S. Secretary of State Antony Blinken is set to return to Israel on Monday. His visit is part of ongoing diplomatic efforts, involving talks with various Arab states, to discuss the way forward in addressing the crisis.
Last week, the U.S. took the step of imposing sanctions on the owners of tankers transporting Russian oil that is priced above the G7’s established price cap of $60 per barrel. This move was intended to address loopholes in the mechanism designed to penalize Moscow for its invasion of Ukraine.
Given that Russia is one of the world’s leading crude oil exporters, the increased scrutiny of its shipments by the U.S. has the potential to limit the global oil supply.
