Crude Oil Prices Surge After War in Israel, Raising Concerns for Global Markets

After witnessing a weekly decline, Crude Oil prices rose sharply on 9^th October (Monday) 2023 amidst the unexpected attack by Hamas on Israel this weekend, raising concerns of a roomier conflict in the Middle East, a major Crude Oil producing country, which could have a significant impact on global Crude Oil prices.

The current conflict between Israel and Palestine is the most serious in recent years, and it comes at a time when Crude Oil markets were already tight as Russia and Saudi Arabia have announced a production cut for millions of barrels. Following that, this weekend, the Palestinian Islamist group Hamas launched the largest military attack on Israel, killing hundreds of people, which could trigger an impulse of a castigatory Israeli air strike on the Gaza Strip.

The previous week, the WTI Crude Oil settled at 87.6 USD/barrel along with Brent settling at 89.9 USD/ barrel under the influence of high-interest rates and slowing growth, which has been overshadowed after the attack. Neither Israel nor Palestine are major Crude Oil producers. However, the conflict would harm the global economy amid any disruption to Crude Oil supplies from the Middle East, which could significantly impact global markets, as the region is home to nearly a third of the global Crude Oil supply. Israel is not a key oil producer but a major oil passage hub. The Eilat-Ashkelon Pipeline transports Crude Oil from the Red Sea to the Mediterranean Sea, and it is a crucial route for Crude Oil exports from Saudi Arabia and other Gulf states. If the conflict escalates, it could damage the pipeline or disrupt its operation, leading to a deterioration in the Crude Oil exports from the region. Furthermore, any instability in Saudi Arabia, the world’s largest exporter of Crude Oil, could reduce exports, which would have a major impact on global oil markets. Likewise, if the conflict is exaggerated, Iran and Palestine could strike back by interrupting Crude Oil exports from other countries in the region.

According to the reports, around 1% of the global Crude Oil supply is nearly in danger if the US opts to endorse sanctions on Iran because Iran has been accused of helping Hamas plan the attacks on Israel, and if this is proven, it could further tighten the Crude Oil supplies. Moreover, the risks are also growing that Israel will attack Iran, which could exacerbate the condition.

As per ChemAnalyst, the Israel-Palestine conflict is a major risk to global Crude Oil markets, and an expected reduction of Crude Oil exports from Iran risks shoving the benchmark above 100 USD/barrel in the short term.