The Israeli-Palestinian conflict has raised concerns about potential disruptions to oil supply in the region, leading to a sharp increase in global oil prices. On Wednesday, markets around the world saw a surge in risk premiums as fears grew that the conflict could spread to other Middle Eastern countries, causing global oil supply disruptions.
One event that contributed to the rise in oil prices was an apparent missile strike on a hospital in Gaza City. This attack resulted in the deaths of hundreds of civilians, including doctors, patients, and individuals seeking shelter. Both Israel and Hamas have blamed each other for the incident. The severity of this attack and the potential for further violence in the region increased investors’ concerns about oil supply disruptions.
As a result of these fears, Brent crude futures rose by nearly 3%, reaching $92.50 per barrel, while US West Texas Intermediate crude futures surged over 3% to $89.27 a barrel. Both benchmarks reached their highest levels in two weeks during the session, causing market fluctuations and increased volatility.
In addition to geopolitical tensions, several other factors contributed to the rise in oil prices. One such factor was the unexpected drop in US crude stocks. In the week ended October 13, US crude stocks decreased by nearly 4.4 million barrels, a much steeper decline than the 300,000 barrel drop that analysts predicted. This decrease in supply further exacerbated concerns about potential disruptions to oil supply.
Furthermore, the Chinese economy’s faster-than-expected growth in the third quarter also played a role in the price increase. The Chinese oil refinery throughput in September hit a record daily rate, up 12% compared to the previous year. This increase was driven by strong demand for transportation fuel during the Golden Week holiday and recovering manufacturing activity. As the world’s second-largest economy, China’s increased demand for oil contributes to global market dynamics.
The escalation of the Israeli-Palestinian conflict, combined with these other factors, has created an environment of uncertainty and volatility in the oil market. It remains to be seen how the conflict will evolve and whether it will lead to further disruptions in oil supply. Investors and market analysts will continue to closely monitor the situation in the Middle East and its potential impact on global oil prices.
In conclusion, the Israeli-Palestinian conflict has fueled concerns about potential oil supply disruptions in the region, leading to a significant increase in global oil prices. Factors such as geopolitical tensions, unexpected drops in US crude stocks, and the faster-than-expected growth of the Chinese economy have further contributed to this price surge. The extent of the conflict’s impact on oil supply remains uncertain, and market participants will closely monitor the situation for any further developments.