Geopolitical Tensions Rattle Oil Markets, Prices Hover at Precarious Heights

Amid escalating military clashes between Israel and Hamas, oil prices experienced a rollercoaster ride, swinging between fear-driven surges and cautious retreats.

Brent crude dipped by 36 cents to $87.79 a barrel while the U.S. West Texas Intermediate (WTI) crude oil shed 35 cents to $86.03 a barrel.

This followed a previous session’s rally of over 4%, fueled by concerns that the conflict might spill over into the oil-rich Middle East.

Hamas initiated its most extensive military assault on Israel in decades, triggering a wave of retaliatory air strikes. Analysts, including those at ING, emphasized the lingering uncertainty in the market due to the ongoing attacks and the possibility of Iran’s involvement.

Should evidence of Iran’s complicity emerge, the U.S. may enforce stricter oil sanctions, exacerbating an already tight global oil market.

Although Israel’s oil production is limited, the shutdown of its port of Ashkelon and oil terminal raised concerns about potential supply disruptions in the Middle East, further straining global oil markets.

On a more positive note, discussions between Venezuela and the U.S. have made progress, potentially allowing one additional foreign oil firm to take Venezuelan crude oil under certain conditions, offering a glimmer of hope for easing sanctions on Caracas.

While the oil industry navigates this geopolitical turbulence, experts like Vivek Dhar from CBA anticipate Brent oil prices stabilizing between $90-$100 per barrel in Q4 2023, with the risk of breaching $100 per barrel if the Palestine-Israel conflict intensifies.