2024-08-27 01:26:32
At a time when the leading economies in the rich world (the US and the Eurozone) are growing anemic or threatened with recession and the great power of the emerging world, China, is changing its growth model and slowing down, oil prices should to retreat. The opposite happens.
In the last period the prices follow the upward trend from one to the other burning middle east and on the other hand in the USA and in particular the Federal Reserve, which is preparing to reduce interest rates to give breathing space to economic activity.
With her Hezbollah and the Israel to trade blows on Sunday, the Middle East has once again reached the brink of all-out war. Both sides wanted – in the midst of mutual accusations and threats – to finally take a step back. But they made it clear that “nothing is over.”
At the same time, the negotiations in Cairo for a ceasefire in Gaza and the release of the hostages were once again hitting the wall of refusal to compromise.
In Gaza the key to developments
OR bloodshed, famine, disease outbreaks which had decades to make their appearance have created a hell on Earth in the Palestinian enclave. And there is no indication that the ordeal will soon come to an end.
Analysts warn that as the war in Gaza rages on, the Middle East will remain on a razor’s edge.
Iran’s reaction is decisive
The Iran after all, he has not made his own move on his pledge to avenge the assassination of Hamas leader Ismail Haniya in Tehran. And the Houthis are preparing their own revenge for an Israeli strike on a Yemeni port.
This whole scenario will continue to push prices upwards, warn market players in “N”, who see the price of Brent stable above 80 dollars and perhaps even close to 90 dollars in the near future.
Today the price of Brent is a breath away from 80, at 79.95 dollars per barrel, while the price of American crude is moving at 75.5 dollars per barrel. The most determining factor in the length and intensity of the price rally is Iran’s next move and how Israel responds to it.
“An Israeli strike on Tehran’s oil facilities would put 3% to 4% of the world’s oil supply at risk,” explains an analyst. If Iran wants to play the Straits of Hormuz card immediately after, things will be even more difficult. In such a scenario – which, however, remains extremely distant – the scenarios for jumping prices above 100 dollars would not take long to come to the fore.
Middle East: What will happen if the Straits of Hormuz are closed?
How the Fed and the Dollar Affect the Market
However, it is not only developments in the Middle East that give direction to prices. Monetary policy moves play an equally decisive role.
Interest rate cuts could slightly boost demand for energy from the world’s major economies. In addition, as US interest rates decline, so will the dollar weaken.
The US currency and commodity prices (valued in it in international markets) tend to move in opposite directions. The more the US dollar depreciates, the more the bullishness of oil and other basic commodities is strengthened.