Oil prices drop as traders evaluate the effects of the Israel-Hamas conflict

16 Oct 2023 , 10:22 AM

As investors watch to see if the Israel-Hamas confrontation involves additional nations, which might drive up costs and inflict a fresh damage to the global economy, oil prices dipped on Monday, partially erasing Friday’s surge.

U.S. West Texas Intermediate (WTI) crude had down 41 cents, or 0.5%, to $87.28 per barrel, while Brent futures had fallen 34 cents, or 0.4%, to $90.55 per barrel.

The price of a larger Middle East conflict was factored in by investors, which led to a roughly 6% increase in both benchmarks on Friday, which was their greatest daily percentage gain since April.

While WTI rose 5.9% during the course of the week, Brent gained 7.5%.

Because Israel is not a major producer, the Middle East conflict has not had a significant influence on the world’s oil and gas supplies.

But despite worries about any possible escalation including Iran, the conflict between Israel and the Islamist organisation Hamas represents one of the greatest geopolitical risks to oil markets since Russia’s invasion of Ukraine last year.

Market participants are analysing the potential effects of a larger conflict on supply from nations in the top oil-producing region of the world, such as Saudi Arabia, Iran, and the United Arab Emirates.

The world was stunned by Hamas terrorists’ horrific assault through Israeli border communities on Saturday, and Israeli Prime Minister Benjamin Netanyahu threatened to ‘demolish Hamas’ as his army prepared to enter the Gaza Strip in pursuit of them.

Iran issued a warning on Saturday, stating that failure to stop Israel’s ‘war crimes and genocide’ could have ‘far-reaching consequences.’

After three days of shuttle diplomacy between Arab states, U.S. Secretary of State Antony Blinken will travel back to Israel on Monday to discuss ‘the way forward’ amid concerns that the crisis could worsen.

In an effort to fill gaps in the system set up to punish Moscow for its invasion of Ukraine, the U.S. moved this week to slap the first sanctions on owners of tankers transporting Russian oil priced higher than the G7’s price threshold of $60 a barrel.

One of the largest suppliers of crude oil worldwide is Russia, and the increased U.S. scrutiny of its exports could hinder supply.

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