Middle East tensions drive global oil price to seven-month peak
On Tuesday, the global oil price surged to a seven-month peak, driven by growing apprehensions that escalating tensions in the Middle East may restrict the oil supply.
The price of oil worldwide went up on Tuesday, reaching its highest point in seven months. This increase was driven, at least in part, by worries that escalating tensions in the Middle East could restrict the availability of oil.
Brent crude, which is considered the standard for oil prices globally, saw a rise of up to 1.8%, reaching $89 per barrel. This is the highest level it has been at since early September. However, later in the afternoon in Europe, these gains were slightly reduced.
Meanwhile, West Texas Intermediate crude, the US benchmark, increased by 1.8% to hit $85 a barrel, marking a five-month high. Brent and WTI prices have gone up by 15% and nearly 19% since the beginning of the year, respectively.
This could potentially lead to an increase in gasoline prices in the United States and other countries.
Richard Bronze, co-founder and head of geopolitics at data firm Energy Aspects, explained that the recent increase in oil prices is the result of a gradual build-up of momentum in the past few weeks.
He pointed out ongoing attacks on Russian refineries in Ukraine, as well as Houthi attacks on shipping in the Red Sea. Additionally, there is a growing perception that the Middle East is currently less stable than it was a year ago.
He pointed out that US oil production has been slower to bounce back after being affected by cold weather in January. This has resulted in a shortage of supply in the market.
Geopolitical tensions
On Tuesday, Sophie Lund-Yates, the lead equity analyst at financial services company Hargreaves Lansdown, discussed the impact of higher oil prices. She specifically highlighted the escalating geopolitical tensions in the Middle East, which intensified after an airstrike on Iran's embassy in Syria on Monday.
Iran and Syria have accused Israel of carrying out the attack, with Tehran cautioning about a potential strong retaliation. The Israeli military declined to comment on the accusations from foreign sources. However, a military spokesperson mentioned that Israel believes the target hit was a facility linked to the Quds forces, a unit of Iran's elite Revolutionary Guards in charge of overseas operations.
Passports of officials working at the US-based international volunteer aid organization World Central Kitchen (WCK) seen after an Israeli attack in Gaza.
Passports of officials working at the US-based international volunteer aid organization World Central Kitchen (WCK) seen after an Israeli attack in Gaza.
Ali Jadallah/Anadolu/Getty Images
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Production cuts by OPEC+ are putting more pressure on prices, according to Lund-Yates.
The recent bombing of Iran's embassy in Damascus has raised concerns that the ongoing conflict between Israel and Hamas in Gaza could escalate into a larger regional war that may impact the supply of oil to global markets.
Brent prices are currently approaching $92.40 per barrel, nearing the peak reached on October 19. This surge in prices occurred shortly after Hamas militants carried out a significant attack on Israeli soldiers and civilians, resulting in the deaths of over 1,200 individuals and the kidnapping of around 200 others.
Bill Weatherburn, a commodities economist at Capital Economics, mentioned that while the war in Gaza has not caused any major disruptions to oil supply yet, the markets are concerned about the possibility of the conflict spreading to the major oil-producing countries in the region.
He also noted that there are indications of an increase in oil demand in China. In a positive development for the world's second-largest economy, the official purchasing managers' index reported the first expansion in manufacturing in six months.
Editor's P/S:
The recent rise in oil prices, reaching a seven-month high, is a worrying trend with potential implications for consumers worldwide. Escalating tensions in the Middle East, particularly the airstrike on Iran's embassy in Syria, have heightened concerns about the stability of oil supply, leading to a surge in prices. The conflict between Israel and Hamas in Gaza, if it escalates, could further impact oil supply and drive prices even higher.
The geopolitical instability in the Middle East, coupled with production cuts by OPEC+, is creating a perfect storm for rising oil prices. As a result, gasoline prices in the United States and other countries could increase, putting a financial strain on consumers already grappling with inflation. It is crucial for governments and international organizations to address the root causes of these tensions and strive for peaceful resolutions to prevent further disruptions to the global oil market.
