Oil price soars as concerns over supply creep in amid Israel-Hamas conflict
11 Oct 2023
The price of oil rose higher on Wednesday, 11 October, with investors concerned about supply disruptions due to the Israel-Hamas conflict.
Brent crude oil price rose to $87.91 a barrel, whereas West Texas Intermediate (WTI) price rose to $86.14 a barrel.
The initial price rise happened on Monday, 9 October, amid Israeli military clashes with Hamas, a Palestinian militant organization.
Although Israel has low production of crude oil, the main cause of market fear is that conflict could spread throughout the Middle East. This would disrupt the supply of oil from the Middle East.
Analysts Warren Patterson and Ewa Manthey from ING Bank warn that the risk of escalation remains, especially if Iran is involved. In this case, stricter enforcement of U.S. sanctions on Iranian oil could tighten the oil market until 2024.
There are some U.S. officials who have criticized Iran for their alleged support for Hamas attacks on Israel. Although there has been no credible evidence to support these claims.
Israel retaliated for Hamas attacks by demolishing parts of Gaza. Meanwhile, powerful Iraqi and Yemeni militias allied with Iran threatened to attack U.S. interests with missiles and drones if Washington intervened to support Israel, keeping markets on edge.
Saudi Arabia on Tuesday, 10 October, have made a statement regarding their efforts to prevent an escalation to other Middle East areas and gave assurances to stabilize oil markets.
The dollar fell to a two-week low against a basket of currencies on Wednesday, 11 October, as investors awaited the minutes of the U.S. Federal Reserve's September policy meeting. A weaker dollar makes oil more affordable for buyers using other currencies, which could increase demand.
Several Federal Reserve officials have recently hinted that the U.S. central bank may not need to raise interest rates any further.
In more optimistic news, Venezuela and the U.S. have made progress in talks that could ease sanctions on Caracas by allowing at least one more foreign oil company to take Venezuelan crude oil under certain conditions.