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Image Credit - Pragativadi[/caption]
Oil prices have jumped quite high after the attack of Hamas on Israel. There is an ongoing concern that the disturbed situation in Israel and Gaza can also impact the output of the Middle Eastern oil supply. The international benchmark Brent Crude rose to $86.83 for a barrel by climbing $2.25 while the prices in the United States also rose. Even though Palestinian and Israeli territories are not oil producers, the entire Middle Eastern region accounts for one-third of the global oil supply. Saul Kavonic. The energy analyst has told BBC that this sudden rise in global oil prices is "due to the prospect of a wider conflagration that could spread to nearby major oil-producing nations such as Iran and Saudi Arabia". On Monday, West Texas Intermediate crude's price was at $85.30 for a barrel, up by $2.50 by the US benchmark.
"If the conflict envelops Iran, which has been accused of supporting the Hamas attacks, up to 3% of global oil supply is at risk," MrKavonic commented. The chief commodities economist at Capital Economics, Caroline Bain also said that Iran has been continuously increasing oil production over this year's course, despite the US' several sanctions. "The US seems to have turned a blind eye to a steady increase in Iranian production, that... is going to be more difficult for the US to ignore going forward from here" she commented. She also said that Capital Economics demanded oil to exceed supply in the final three months of 2023 while adding "that should support higher prices".
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Image Credit - BBC News[/caption]
According to MrKavonic, around a fifth of global supply would absolutely be "held hostage" if the passage through the Strait of Hormuz is disrupted as it is one of the most crucial oil trading routes. This route is vital for most oil suppliers in the Gulf region, where economies are built around gas and oil production.
How events would turn up in the upcoming time is also uncertain which might drive investments to the "US Treasury bonds and the dollar". Investors traditionally buy this at the time of crisis according to James Cheo from HSBC bank. Reportedly on Monday, the central bank of Israel said that the country would sell $30bn of foreign currency in order to support the country's open currency, the sahel which saw a significant fall. Mr. Cheo added, "At this stage, there is a bit of nervousness. [Investors] want to see a little more clarity, particularly on economic data and on developments associated with geopolitical uncertainty." The same condition was seen in February 2022 when Russia invaded Ukraine and oil prices soared more than ever, reaching up to $120 a barrel, in June of last year. Even though they have fallen to a bit above $70 a barrel in May of this year, the prices have steadily risen as a result of oil producers restricting output to support the international market. At that time, Saudi Arabia, which is a major global oil producer, said that it would make cuts of a million barrels a day in July followed by other members of Opec+.
Image Credit - Pragativadi[/caption]Oil prices have jumped quite high after the attack of Hamas on Israel. There is an ongoing concern that the disturbed situation in Israel and Gaza can also impact the output of the Middle Eastern oil supply. The international benchmark Brent Crude rose to $86.83 for a barrel by climbing $2.25 while the prices in the United States also rose. Even though Palestinian and Israeli territories are not oil producers, the entire Middle Eastern region accounts for one-third of the global oil supply. Saul Kavonic. The energy analyst has told BBC that this sudden rise in global oil prices is "due to the prospect of a wider conflagration that could spread to nearby major oil-producing nations such as Iran and Saudi Arabia". On Monday, West Texas Intermediate crude's price was at $85.30 for a barrel, up by $2.50 by the US benchmark.
"If the conflict envelops Iran, which has been accused of supporting the Hamas attacks, up to 3% of global oil supply is at risk," MrKavonic commented. The chief commodities economist at Capital Economics, Caroline Bain also said that Iran has been continuously increasing oil production over this year's course, despite the US' several sanctions. "The US seems to have turned a blind eye to a steady increase in Iranian production, that... is going to be more difficult for the US to ignore going forward from here" she commented. She also said that Capital Economics demanded oil to exceed supply in the final three months of 2023 while adding "that should support higher prices".
[caption id="attachment_26919" align="aligncenter" width="800"]
Image Credit - BBC News[/caption]According to MrKavonic, around a fifth of global supply would absolutely be "held hostage" if the passage through the Strait of Hormuz is disrupted as it is one of the most crucial oil trading routes. This route is vital for most oil suppliers in the Gulf region, where economies are built around gas and oil production.
How events would turn up in the upcoming time is also uncertain which might drive investments to the "US Treasury bonds and the dollar". Investors traditionally buy this at the time of crisis according to James Cheo from HSBC bank. Reportedly on Monday, the central bank of Israel said that the country would sell $30bn of foreign currency in order to support the country's open currency, the sahel which saw a significant fall. Mr. Cheo added, "At this stage, there is a bit of nervousness. [Investors] want to see a little more clarity, particularly on economic data and on developments associated with geopolitical uncertainty." The same condition was seen in February 2022 when Russia invaded Ukraine and oil prices soared more than ever, reaching up to $120 a barrel, in June of last year. Even though they have fallen to a bit above $70 a barrel in May of this year, the prices have steadily risen as a result of oil producers restricting output to support the international market. At that time, Saudi Arabia, which is a major global oil producer, said that it would make cuts of a million barrels a day in July followed by other members of Opec+.
