Rising Tensions in Middle East Spark Oil Price Surge

12 Apr 2024 , 10:39 AM

Due to increased Middle East tensions and Iran’s threat to respond for what it believes to be an Israeli airstrike on its embassy in Syria, oil prices increased in early trading on Friday. This might lead to supply interruptions from the oil-producing region.

U.S. West Texas Intermediate crude futures increased by 44 cents, or 0.51%, to $85.45, while Brent crude futures increased by 34 cents, or 0.38%, to $90.08 a barrel.

Gains from the previous session, which was characterised by concerns over persistent U.S. inflation that tempered expectations for an interest rate decrease as early as June, were partially offset by the gains.

Tension in a region already strained by the Gaza war increased after suspected Israeli aeroplanes bombed Iran’s embassy in Damascus on April 1. Iran has pledged to exact retribution.

Ayatollah Ali Khamenei, the top leader of Iran, stated on Wednesday that Israel “must be punished and it shall be” for the attack, while Israel has not acknowledged responsibility.

According to a U.S. official, Washington anticipates an attack by Iran on Israel, but it won’t be significant enough to force Washington into combat. According to Iranian sources, Tehran has indicated a move to prevent a significant escalation.

Prime Minister Benjamin Netanyahu stated on Thursday that although Israel is continuing its battle in Gaza, it is also getting ready for contingencies in other domains.

Central bankers in Europe, where the labour market has started to weaken and growth is stalling, kept the policy rate at its current level on Thursday but indicated they are still planning to lower rates as early as June.

Nonetheless, the Federal Reserve of the United States warned on Thursday that it will not be rushing to lower interest rates since sticky inflation is still a worry.

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