Crude oil prices reached as high as $89 a barrel on Monday. This rise is attributed to concerns that the attack by Hamas on Israel may escalate tensions in the Middle East, influencing output from primary oil suppliers.
Brent crude, a major global oil standard, saw an initial rise of 5.2% during Asia’s early market hours but settled at an increase of 2.7% priced at $86.87.
While Israel isn’t an oil-producing nation, the ongoing conflict could introduce broader regional instability. This might lead to stricter enforcement of oil sanctions on Iran, which supported Hamas’s actions, as an act of self-defence.
This turbulence could also challenge the Biden administration’s initiatives to mediate a pact between Saudi Arabia and Israel. Such conflicts could influence Saudi Arabia’s decision to increase its oil production.
Helima Croft of RBC Capital Markets commented, “The Israeli government promises a robust retaliation. Imagining Saudi-Israel normalization discussions in light of an intense military response seems unlikely.”
She further noted that the US has been lenient on Iranian oil sanctions, but this stance might toughen if Israel implicates Iran in supporting Hamas.
Energy-focused hedge fund manager, Pierre Andurand, expressed that while immediate supply threats are minimal, the market could become more restrictive. He shared on social media platform X, formerly known as Twitter, that the US might enforce Iranian oil sanctions more strictly due to the recent rise in Iranian supply.
Recent claims by Hamas in The Wall Street Journal suggest that Iran’s Islamic Revolutionary Guard was involved in planning their attack on Israel. US Secretary of State, Antony Blinken, however, stated that there’s no verified evidence linking Iran to this attack.
Vivek Dhar from the Commonwealth Bank of Australia emphasized the potential implications for Iran’s oil supply and exports. He proposed that a US confirmation of Iran’s involvement might lead to stricter sanctions enforcement, potentially driving Brent prices over $100 a barrel.
Dhar further mentioned, “A US attribution of this attack to Iran might negate much of this year’s surge in Iranian oil exports, which could affect 0.5 to 1% of global supply – a significant amount.”
