The recent escalation of the Israel-Palestine conflict is not expected to have an immediate impact on the global oil market, according to crude traders who spoke to Bloomberg. As the market prepares to open, traders have stated that a massive oil price surge is unlikely unless the conflict spreads across the region.
On Saturday, the Palestinian armed group Hamas launched thousands of missiles at Israel and deployed militants to infiltrate Jewish settlements near the border with Gaza. In response, Israel launched the ‘Iron Swords’ operation. The ongoing conflict has resulted in significant loss of life and destruction on both sides.
Hamas is seen as one of the key backers of the attack on Israel, with Iran being a major oil producer and also an OPEC member, and is believed to support Hamas. However, experts suggest that the likelihood of the conflict spreading to Iran is low.
Bob McNally, president of Rapidan Energy Group and a former White House official, stated that the “oil disruption scenario would be if conflict spread to Iran,” but added that such a sequence of events appears unlikely.
While the immediate impact on the oil market is expected to be minimal, traders raised concerns about the potential impact on supply and prices in the future. Pierre Andurand, a hedge fund trader from Andurand Capital Management, stated that the conflict could eventually impact supply and prices, although it is unlikely to do so in the short term.
Iran has expressed public support for the Palestinian attack, and if Tel Aviv were to respond by striking any infrastructure in Iran, crude prices would immediately spike due to the perceived risk of disruption.
Iranian crude shipments have recently rebounded to a five-year high and have become increasingly important to the global market. However, the latest hostilities could lead to more aggressive actions by the US towards Iranian cargo flows, particularly those that are primarily destined for China.
Andurand suggested that stronger enforcement of Iranian sanctions may result from this development, leading to reduced Iranian oil going forward. The potential domino effect in the region is uncertain and difficult to predict.
One possible response from the Islamic Republic could be the blocking of the Strait of Hormuz, a vital waterway through which nearly 17 million barrels of crude pass each day.
As the situation continues to unfold, the international community closely watches the developments and prepares for any potential impacts on the global oil market and prices.