The Middle Eastern conflict that erupted between Israel and Palestine has greatly impacted the global oil market. According to Bloomberg, WTI futures climbed more than 5% before paring some gains.
Israeli warplanes launched airstrikes on the Gaza Strip in response to a rocket attack by the Palestinian militant group Hamas. The conflict has since escalated, with both sides launching further attacks.
Oil prices rose by more than 4% on October 9, 2023, as investors worried about the potential for a wider conflict in the Middle East. The Middle East is home to some of the world's largest oil producers, and any disruption to supply could have a significant impact on global oil prices. The Israel-Palestine conflict impacts the oil market in a number of ways.
First, the conflict could lead to disruptions in oil production and transportation in the Middle East. This is because the region is home to some of the world's largest oil producers and exporters, such as Saudi Arabia, Iraq, and Iran. Second, the conflict could also increase geopolitical risk in the region. This could lead to increased investor demand for oil as a safe haven asset. And Third, the conflict could also reduce demand for oil, as businesses and consumers in the region become more cautious about spending.
In addition, the conflict has raised concerns about increased geopolitical risk in the region. This has led some investors to buy oil as a safe haven asset.
Iran's involvement in the conflict matters as it impact the oil market. Iran has been under considerable financial pressure itself ever since the U.S.’s unilateral withdrawal from the “nuclear deal” in May 2018. This has meant that Iran has been finding it increasingly difficult to pay its military proxies in the Shia Crescent countries, including Hamas in Palestine and Hezbollah in Lebanon, so this oil deal between Iraq and Lebanon may be regarded as one instrument in Iran arranging an effective method of continuing the fund these military proxies.
The overall impact of the Israel-Hamas conflict on oil prices will depend on a number of factors, such as the severity and duration of the conflict, the level of geopolitical risk in the region, and the global economic outlook.
In the short term, the conflict is likely to have a limited impact on oil prices. However, if the conflict escalates and spreads to other oil-producing countries, it could have a significant impact on global oil supply and prices. However, if the conflict escalates and spreads to other oil-producing countries, it could have a significant impact on global oil supply and prices.
What is the long-term prospect of the conflict for Iran? In the long term, the impact of the Israel-Palestine conflict on Iran on the oil market is less clear. If the conflict is resolved and sanctions are lifted, Iran could increase its oil production and exports, which would benefit the Iranian economy. However, if the conflict continues and sanctions are tightened, Iran's oil production and exports could be further disrupted, which would hurt the Iranian economy.