HomeLatest NewsIranian Supply Impact: Oil Surges 4% Amidst Mideast Crisis

Iranian Supply Impact: Oil Surges 4% Amidst Mideast Crisis

Oil Prices Surge Amidst Middle East Crisis

Crude prices climbed 4% on Monday as the latest Middle East crisis injected geopolitical risk into the oil trade, resetting markets that were previously weighed down by concerns over the global economy.

Impact of Middle East Crisis on Oil Markets

With the ongoing conflict between Israel and Palestine intensifying, oil traders are closely monitoring the potential impact on oil supply from Iran. As one of the world’s largest crude exporters and a vocal supporter of the Palestine cause, Iran’s involvement in the crisis raises concerns about disruptions to global oil shipments.

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However, experts argue that without a significant reduction in Iranian oil supply or transport, the price of oil may not rise significantly. The key lies in determining the extent of Iran’s sponsorship of the conflict and whether Israel’s response will result in severe damage to Iran’s oil shipments. Additionally, the involvement of Western countries and the possibility of imposing sanctions on Iran could further impact its oil supply and exports.

OPEC+ Production Cuts Continue

Meanwhile, the global group of oil producers known as OPEC+ is maintaining its production cuts. Saudi Energy Minister Abdulaziz bin Salman emphasized the importance of preserving the cohesion of OPEC+ and expressed confidence in the precautionary approach, even if it means extending the cuts for several more months.

These production cuts, combined with the potential supply disruptions caused by the Middle East crisis, have contributed to the recent volatility in oil prices.

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Market Response and Future Outlook

Last week, the oil market experienced a significant sell-off due to various macroeconomic factors, including rising US Treasury yields and a strong dollar. However, the ongoing conflict in the Middle East has the potential to shift market dynamics. If the crisis escalates or involves Western countries, the risk of future sanctions against Iran increases. Consequently, oil prices may behave more like a safe-haven asset as the geopolitical landscape deteriorates.

It is important to note that the oil market remains volatile, and potential supply disruptions need to be balanced with falling global travel demand. The overall impact of the Middle East crisis on oil prices will depend on the duration and severity of the conflict.

(Peter Nurse contributed to this article)

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