Oil Prices Surge as Israel-Hamas Conflict Enters Third Day
Oil prices experienced a sharp increase on Monday as the Israel-Hamas conflict continued into its third day. The surge followed a surprise attack on Israel by Palestinian militants Hamas.
Global benchmark Brent traded 4.07% higher at $88.02 a barrel, while U.S. West Texas Intermediate futures rose 4.25% to $86.31 per barrel.
The conflict escalated on Saturday during a major Jewish holiday when Hamas launched a multi-pronged infiltration into Israel through land, sea, and air, including the use of paragliders. This attack came after thousands of rockets were launched from Gaza into Israel. According to NBC News, at least 700 Israelis have been killed, and the Palestinian Healthy Ministry has recorded 313 deaths so far.
Although crude prices have surged, analysts believe that this increase could be a temporary knee-jerk reaction. Vivek Dhar, Commonwealth Bank’s director of mining and energy commodities research, stated that for the conflict to have a significant and lasting impact on oil markets, there must be a sustained reduction in oil supply or transport. Dhar mentioned that historically, positive oil price reactions tend to be temporary and are easily overtaken by other market forces. He also noted that the conflict does not directly threaten any major source of oil supplies.
Neither Israel nor the Palestinian territories are major oil players. Israel has two oil refineries with a combined capacity of nearly 300,000 barrels per day and virtually no crude oil and condensate production. Similarly, the Palestinian territories produce no oil, according to data from the U.S. Energy Information Administration (EIA).
However, the conflict is unfolding near a crucial oil producing and export region for global consumers. Iran, with its significant oil reserves, is a major concern for the market. Dhar noted that if Western countries officially link Iranian intelligence to the Hamas attack, Iran’s oil supply and exports could face imminent downside risks.
Additionally, there are concerns that the conflict could escalate regionally. Henning Gloystein, Eurasia Group’s Director of Energy, Climate, and Resources, stated that if Iran becomes involved, there could be supply issues. However, he clarified that the current events have no immediate impact on oil supply.
It remains to be seen how the Israel-Hamas conflict will unfold and whether it will have a lasting effect on oil markets. The situation is closely watched by analysts and industry experts as they assess the potential impact on oil supply and prices.