The ongoing conflict between Israel and Hamas has sent ripples through the global financial markets, particularly affecting the oil industry. As Israel launches a ground offensive in Gaza, the world watches with bated breath, anticipating the potential repercussions on oil prices and supply.
The International Energy Agency (IEA) has expressed concerns about the potential for output disruption in the Middle East due to the conflict. While Israel is not a major oil producer and no significant oil infrastructure is located near the Gaza Strip, the Middle East accounts for more than one-third of global seaborne oil trade. The conflict has heightened fears that the fighting may affect regional energy production. The IEA has noted a “sharp escalation in geopolitical risk” and has committed to closely monitor oil markets, ready to act if necessary to ensure markets remain adequately supplied.
The IEA’s response to an abrupt oil supply shortage includes member countries releasing emergency stocks and/or implementing demand restraint measures. However, the agency has stated that, for now, there has been no direct impact on supplies. The IEA is closely watching the situation, and if it spills over and spreads to the wider Middle East, this could become a significant concern.
The conflict has certainly raised geopolitical tensions in the Middle East, and this is something that the IEA is watching very closely. Toril Bosoni, head of the oil markets division at the International Energy Agency, has stated that the conflict is a major concern to the market. However, she also noted that the OPEC+ alliance stands ready to do what they can to stabilize the market, which is reassuring.
When oil markets opened following the surprise attack by Hamas on Israel on Oct. 7, the IEA said traders priced in a $3 to $4 risk premium. However, prices have since stabilized. Crude futures traded higher on Thursday. International benchmark Brent crude futures with December expiry traded 0.9% higher at $86.59 per barrel at around 9:30 a.m. London time, while front-month November U.S. West Texas Intermediate crude futures rose 0.7% to trade at $84.06 per barrel.
The Israel-Hamas conflict has not only affected the oil markets but also other financial markets. For instance, gold prices had gained after Israel expanded its ground operations, fueling concerns that escalating tensions in the Middle East could affect the global economy.
In conclusion, the Israel-Hamas conflict has had a significant impact on the global oil markets, causing prices to fluctuate and raising concerns about potential disruptions to oil supply. The situation remains fluid, and the international community continues to monitor developments closely. The IEA, in particular, is prepared to take necessary actions to ensure that the oil markets remain adequately supplied.