Crude oil prices turned slightly lower but held Friday’s 6% gains on the first trading day of the week, as energy traders assess whether the turmoil in the oil-rich Middle East could have an impact on global oil and gas supplies.
Hama’s surprising attack on Israel has increased the geopolitical risk to global energy markets. It poses one of the most significant economic and political risks since Russia's invasion of Ukraine in early 2022.
Israel is expected to commence a massive ground military offensive into the Palestinian territory Gaza, to root out the Islamic group Hamas, after amassing troops at the border last week, which could fuel some fears related to oil production in the region.
The international benchmark Brent crude oil and WTI-West Texas Intermediate posted their best trading day since early April on last Friday, gaining almost 6% to $91/b and $88/b respectively, as traders priced in the possibility of a wider Middle East conflict.
Brent crude oil, Daily chart
Since the eruption of the conflict in Israel on October 07, Brent recorded a gain of 7.5% until today, its biggest weekly increase since February, while WTI climbed 5.9% for the same period, even though neither side (Israel & Palestine) is a big oil producer.
Israel boasts two oil refineries with a combined capacity of almost 300,000 barrels per day, while it produces and exports good quantities of natural gas from its offshore gas fields Tamar and Leviathan.
The price of Brent still holds most of last week’s gains, currently trading at just below $91/b mark, as market observers are assessing how the conflict could escalate and what it might mean for supplies from nearby countries in the world’s top oil-producing region-Persian Gulf.
Even though the conflict in the Middle East has had little impact on global oil and gas supplies, traders worried about whether other countries such as Iran would get involved and support Palestinians, and the conflict escalates into a broader Middle East war, disrupting oil and gas supplies.
The resume of oil rallies has added pressure on growth-sensitive stock markets worldwide, as the higher oil prices support resilient inflation, which in turn, would force central banks to hike further or at least maintain rates higher for longer into 2024, deteriorating the world’s economic growth outlook.
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