“Hamas Provokes Oil Price Surge Amidst Israel Attack”

Oil prices surge following Hamas attack on Israel

Concerns over Middle East output disruption

Oil prices rose by 4% on Monday as fears grew that the recent conflict between Israel and Gaza could potentially disrupt oil output from the Middle East. West Texas Intermediate (WTI), the benchmark for US oil, reached over $86 a barrel, while the price of Brent crude also experienced a surge in early Asian trading. While Israel and the Palestinian territories themselves do not produce oil, the Middle Eastern region as a whole contributes to almost a third of global oil supply.

The Hamas militant group launched a series of attacks on Saturday, marking the most significant escalation of violence between the two sides in decades. Western nations have condemned the attacks, while Hamas claims to have received support from Iran. However, Iran has denied involvement in the attack at a UN Security Council meeting in New York on Sunday.

Potential risks for global oil supply

Energy analyst Saul Kavonic warns that the risk premium on oil is increasing due to the possibility of a broader conflict that could impact major oil-producing nations such as Iran and Saudi Arabia. Should the conflict spread to Iran, which has been accused of supporting the Hamas attacks, up to 3% of global oil supply could be at risk. Additionally, if passage through the Strait of Hormuz, a vital oil trading route, is disrupted, approximately a fifth of global supply would be held hostage.

The Strait of Hormuz is particularly essential for Gulf region countries that heavily rely on oil and gas production for their economies. Uncertainty regarding the future developments of the conflict may also drive investments into US Treasury bonds and the dollar, as investors traditionally seek these safe-haven assets during times of crisis.

Market response and global efforts to stabilize oil prices

James Cheo from HSBC bank suggests that at present, there is significant nervousness among investors who are looking for greater clarity in terms of economic data and geopolitical developments. As a result, investments into US Treasury bonds and the dollar are expected to increase.

Since the Russian invasion of Ukraine in February 2022, oil prices have been volatile. They surpassed $120 a barrel in June last year, fell to just above $70 a barrel in May this year, and have been gradually rising since then as producers attempt to limit output to support the market. Saudi Arabia, one of the world’s major oil producers, announced it would cut production by one million barrels per day in July, and other OPEC+ members have also agreed to continuing production cuts to stabilize prices.

Conclusion

The recent Hamas attack on Israel has triggered a significant surge in oil prices, driven by concerns over potential disruptions to oil output from the Middle East. The risk of a wider conflict involving major oil-producing nations such as Iran and Saudi Arabia has raised the risk premium on oil, leading to uncertainty in the market. As tensions continue to escalate, investors are seeking safe-haven assets such as US Treasury bonds and the dollar.

Efforts by major oil producers, including Saudi Arabia and OPEC+, to restrict output have been ongoing in order to stabilize prices and support the market. However, the volatility in oil prices highlights the vulnerability of the global oil market to geopolitical tensions and conflicts.

It remains to be seen how the situation in the Middle East will unfold in the coming days and whether diplomatic efforts can alleviate the tensions. Nonetheless, the impact of these events on global oil prices and the potential consequences for the energy industry and the broader global economy should not be underestimated.