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Middle East tensions could spark surge in oil prices; risks ahead: NYT

  • By Al Mayadeen English
  • Source: The New York Times
  • 11 Oct 2024 20:55
  • 1 Shares
3 Min Read

Following Iran’s retaliatory missile strikes on Israel last week, oil prices surged, with Brent crude rising more than 15%, surpassing $81 per barrel before settling around $79.

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  • FILE - Projectiles fly through the sky in central occupied Palestine as a siren sounds a warning of incoming missiles fired from Iran towards
    Projectiles fly through the sky in central occupied Palestine as a siren sounds a warning of incoming missiles fired from Iran toward "Israel", on October 1, 2024. (AP)

An article published by Stanley Reed for The New York Times on Friday outlined the significant impact of the "Israel"-Iran escalation on global oil markets.

Following Iran’s retaliatory missile strikes on "Israel" last week, oil prices surged, with Brent crude rising more than 15%, surpassing $81 per barrel before settling around $79.

Despite this spike, prices remain lower than earlier in the year due to factors, such as slowing demand from China, increased US production, and the possibility of OPEC+ increasing supply.

Read more: Middle East escalations drive up oil prices, influence OPEC+ decisions

Reed cautioned that the situation could worsen if "Israel" targets Iranian oil facilities, potentially causing major disruptions to global oil supply.

As a key oil producer, Iran exports much of its 3.4 million barrels per day to China, and any disruption to these exports could further drive up prices.

Bob McNally, president of Rapidan Energy Group, warned that prolonged interruptions in oil flows from the Gulf could push prices above $100 per barrel, potentially triggering a global recession.

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McNally added that the escalating back-and-forth between "Israel" and Iran could lead to unpredictable outcomes, stating, "Once that gets going, all bets are off."

Reed also noted that, despite the concerns, several factors are keeping prices in check, including diplomatic efforts and improved relations between Iran and Saudi Arabia, which may help avert a full-scale disruption of oil production.

How a Middle East war could impact oil prices

An op-ed published by NYT earlier this month detailed similar concerns. Writer Sarah Kessler argues that oil markets, in particular, are beginning to react to the possibility of a larger regional war, especially after US President Joe Biden revealed talks of supporting a possible Israeli strike on Iran’s oil facilities.

At the time of publishing, Brent crude saw its largest weekly gain in over a year, prompting investors and strategists to brace for a potential oil supply shock that could drive inflation and disrupt energy supplies worldwide.

Experts like former Citi political analyst Tina Fordham noted that while the situation hasn't yet reached a critical tipping point, it presents a "constellation of risks" that could converge if the conflict intensifies. A key concern remains the potential disruption of the Strait of Hormuz, a vital passage for 20% of the world’s oil. If access were compromised, experts warn of a sharp rise in oil prices, exacerbating inflation when many nations are just beginning to control price surges.

The op-ed further pointed out that, while Brent crude remains below levels considered alarming by central banks, a rise toward $90 per barrel could force monetary authorities to rethink their economic strategies. Analysts are closely watching not only military developments but also the potential influence of the conflict on US elections, particularly the 2024 presidential race.

Read more: How an oil price shock will affect American consumers: FT

As the op-ed concludes, the world may be witnessing the calm before a storm, with global markets awaiting "Israel's" next move and the potential for a broader war that could have severe economic repercussions.

  • Israel
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  • global oil market
  • Oil prices
  • Iran
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