Oil prices shot up to $89 a barrel amid the Israel-Hamas conflict
09 Oct 2023
Oil prices rose up to $89 a barrel in Asian trade on Monday, 9 October, amid intense military clashes between Israel and the Palestinian Islamist group Hamas. The geopolitical tension in the area increased the uncertainty of supplies.
Brent crude climbed by $3.10, equivalent to a 3.67% increase, reaching $87.68 per barrel as of 0400 GMT. Simultaneously, U.S. West Texas Intermediate crude was trading at $86.05 per barrel, marking a $3.26 gain or a 3.94% rise. Both of these benchmark oil prices initially surged by over $4 per barrel before experiencing a minor pullback.
An analyst from ANZ Bank said that the geopolitical risk in the Middle East could bring unstable oil prices.
This increase in oil prices is the complete opposite of last week’s trend, which saw the largest decline since March 2023. Last week, Brent saw a decrease of 11%, and West Texas Intermediate saw a decline of 8% amid high interest rate concerns.
On Saturday, 7 October, Hamas, a Palestinian Islamist group, launched one of the largest military assaults on Israel, killing hundreds of Israelis.
Energy analyst Saul Kavonic said in an interview that this conflict may spread across the Middle East and reach major oil producers like Saudi Arabia and Iran, which would increase the premium on oil barrels.
This ongoing violence could potentially derail the efforts undertaken by the U.S. to re-establish normal ties between Saudi Arabia and Israel. The U.S. wants to make this work in return for a defense deal between Washington and Riyadh.
Saudi officials had informed the White House of their intention of increasing the output next year as part of the Israeli deal.
This increase would help the U.S. tackle the low supply it has been encountering for months from Saudi Arabia and Russia.
The potential normalization of Saudi-Israeli relations could potentially halt the recent progress in thawing relations between Saudi Arabia and Iran. Iran has openly expressed support for the Hamas attacks, raising concerns among analysts that an escalation in the conflict could disrupt oil supplies.
Saul Kavonic even stated that up to 3% of the global oil supply would be at risk if this conflict spread to Iran. He added that if a wider conflict begins that ends up impacting the Strait of Hormuz, then around 20% of the global oil supply could be cut off.