The ongoing conflict between Israel and Hamas has raised concerns about its potential impact on global oil markets. While Israel itself is not a major oil producer, the involvement of Iran in the conflict could have significant repercussions for oil supply and prices. In recent years, Washington had turned a blind eye to surging Iranian oil exports, bypassing American sanctions in pursuit of a détente with Tehran.[0] As a result, Iranian oil output has increased by nearly 700,000 barrels a day this year, making it the second-largest source of incremental supply in 2023 after US shale.[0] However, the White House is now likely to enforce sanctions on Iran, which could push oil prices to $100 a barrel or higher.[0]
If the US tightens sanctions on Iranian oil exports, it would have a major impact on global oil supply. This is a concern not only for Israel but also for major producers like Iran and Saudi Arabia.[1] If it emerges that Iran aided Hamas in the recent attack on Israel, there could be further sanctions on Iran, which would further disrupt oil markets.[1] Additionally, the conflict could derail a potential deal normalizing relations between Israel and Saudi Arabia, which had been expected to lead to an increase in Saudi oil output.[1]
The conflict between Israel and Hamas could have a significant effect on global oil supply security. If Iran becomes directly involved in the war, it could disrupt key supply lines and drive up oil prices. The Middle East accounts for more than one-third of global seaborne oil trade, and any disruptions to supply from the region would have a major impact on oil markets. This is particularly concerning given the current tightness in the market due to output cuts by Saudi Arabia and Russia.[2]
The International Energy Agency (IEA) has noted that while the conflict has not yet had a direct impact on physical oil supply, energy market participants will remain on edge as the crisis unfolds.[3] The IEA has also stated that it stands ready to act in case of a market disruption, although the nature of the action remains undisclosed.[4] The uncertainty surrounding the conflict and its potential impact on oil markets has already led to a rise in oil prices, with Brent crude futures rising by 4.2% and US benchmark West Texas Intermediate rising by 4.3%.[5]
The situation in the Middle East is fluid, and the impact on oil markets will depend on how Israel and Iran respond to the conflict. If Israel concludes that Hamas acted on instructions from Tehran, oil prices could go even higher.[0] Iran has previously demonstrated its ability to disrupt oil production capacity, and it could do the same in retaliation if it finds itself under attack. The conflict also raises concerns about the stability of the region and the potential for further violence, which could have long-term implications for oil markets.
While the conflict between Israel and Hamas is a cause for concern, it is important to note that it is not a repeat of the 1973 Arab oil embargo. Arab countries are not attacking Israel in unison, and major Arab players like Egypt, Jordan, Syria, and Saudi Arabia are currently watching the events from the sidelines rather than shaping them.[0] However, the conflict does highlight the risks and uncertainties in the region, which could lead to higher oil prices in the future.
Overall, the ongoing conflict between Israel and Hamas has the potential to disrupt global oil markets and drive up oil prices. The involvement of Iran in the conflict is particularly concerning, as it is a major oil producer and has previously demonstrated its ability to disrupt oil production. The situation in the Middle East is fluid, and the impact on oil markets will depend on how the conflict unfolds.[0] However, it is clear that the conflict raises significant risks and uncertainties for global energy markets.
0. “Opinion: For Oil, Its Not 1973 Again But It Could Still Turn Ugly” NDTV, 7 Oct. 2023, https://www.ndtv.com/opinion/opinion-hamas-attack-on-israel-for-oil-its-not-1973-again-but-it-could-still-turn-ugly-4460596
1. “Oil price leaps and airline shares fall after Hamas attack on Israel” The Guardian, 9 Oct. 2023, https://www.theguardian.com/business/2023/oct/09/oil-price-arms-firms-shares-hamas-attack-on-israel-bae-systems
2. “Investors flock to defensive stocks and safe havens on worries about Israel-Hamas war” CNN, 13 Oct. 2023, https://www.cnn.com/2023/10/13/investing/premarket-stocks-trading-defensive-assets-war/index.html
3. “‘Fraught with uncertainty': IEA says oil markets to remain on tenterhooks as Israel-Hamas war persists” NBC 5 Dallas-Fort Worth, 12 Oct. 2023, https://www.nbcdfw.com/news/national-international/fraught-with-uncertainty-iea-says-oil-markets-to-remain-on-tenterhooks-as-israel-hamas-war-persists/3358521
4. “All Eyes On Iran For Security Of Oil Supply” OilPrice.com, 14 Oct. 2023, https://oilprice.com/Energy/Crude-Oil/All-Eyes-On-Iran-For-Security-Of-Oil-Supply.html
5. “Will global oil prices keep rising due to the Israel-Hamas war?” Al Jazeera English, 10 Oct. 2023, https://www.aljazeera.com/economy/2023/10/10/will-global-oil-prices-keep-rising-due-to-the-israel-hamas-war
