Twenty days have passed since the first war was officially declared by Israel after 50 years. While air strikes continued uninterruptedly in Gaza, explosions were heard in other parts of the Middle East. The rocket that fell on Egypt’s Red Sea resort city of Taba injured many people, and US warplanes started bombardment at 04.30 in the middle of the night.
Attacks have increased since the Israel-Hamas conflict began on October 7. It raises fears that the conflict between Israel and Hamas, which is backed by the US, could affect and disrupt supplies to major crude oil producer Iran, which backs Hamas. A wider war could also affect shipments from Saudi Arabia, the world’s largest oil exporter, and other major producers in the Gulf.
Oil prices rose above $1 on Friday as concerns grew that conflict could expand, affecting supplies from a key producing region in the Middle East.
December Brent crude futures rose $1.32, or 1.5%, to $89.25 a barrel as of 06:38 GMT. West Texas Intermediate (WTI) rose $1.29, or 1.6%, to $84.50 a barrel.
Both Brent and WTI are on track to post their first weekly declines in three weeks as the geopolitical premium on these fears slightly diminishes and there are no disruptions to oil supplies outside the immediate war zone.
The plans of the ground offensive by Israeli forces in their 20-day war with Hamas has angered the Arab world. While Netanyahu said Israeli troops were preparing for a full-blown ground offensive, the United States and other countries urged Israel to delay a ground offensive for fear it could ignite hostilities on other Middle Eastern fronts.
It remains extremely difficult even for expert regional observers to make convincing assessments about the course of the current crisis, as the red lines that could bring more players to the battlefield are highly uncertain.
Some analysts kept their first-quarter 2024 Brent crude oil price forecasts at $95 per barrel but added that reduced Iranian exports could cause base prices to increase by 5%.
In a less likely scenario of disruption to trade through the Strait of Hormuz, through which 17% of global oil production passes, prices could rise 20%.
Meanwhile, it should not be forgotten that the voluntary supply cuts by Saudi Arabia and Russia, which will last until the end of the year, tightened global markets and supported prices.
