Following a Hamas attack on Israel on 7th October, geopolitical tensions have risen markedly in the region. Since then, the Israeli Defence Force (IDF) has retaliated and is in the final stages of preparations for a ground offensive.
In the days and weeks after the initial attack, many global markets were visibly choppy, notably crude oil. The Brent crude oil (DH-0) [Mintec Code: BCRD] price moved upwards in early trading on Monday, 9th October, closing the day up nearly 5% at $88.15/barrel, before peaking at $92.38/barrel on 19th October. As of 23rd October, however, the price has levelled off, closing at $89.83/barrel.
Market players have been extremely concerned that the transport of crude oil would be negatively impacted as a result of the conflict. However, Israeli freight activities appear to be continuing, albeit with rapidly changing risk premiums due to the war.
Currently, the major risk to the crude oil market, and the broader economic environment, is an escalation of the war, particularly if Iran were to become involved. Regional sources say that this is possible, but not probable, with the greatest chance of a wider conflict depending on how Iran chooses to support Hezbollah in south Lebanon. There have been reports of skirmishes between the IDF and Hezbollah in recent days.
Contacts pointed out that although direct Iranian involvement is unlikely, if this were to materialise, the crude oil price would likely spike on supply fears and potential large-scale freight disruptions through the Strait of Hormuz.
This situation continues to evolve, and Mintec will endeavour to provide updates on how the conflict is impacting commodities as information becomes available.