Oil market likes Israeli conflicts with Hamas, Iran

New Europe

Despite the prospect of continued increases in production from the US and Iraq, combined with the European debt crisis, oil prices started the week firm amid escalating violence in the Middle East. On 19 November, oil prices rallied more than $2 a barrel. The price of benchmark Brent crude oil rose as much as $2.39 a barrel, or 2.2%, to touch $111.34 – the highest in nearly two weeks.

Even though neither Israel nor the Palestinian Territories is a significant oil producer, traders and investors fear the Israel-Gaza tensions could spread to other countries in the region and affect oil exports.

Manouchehr Takin, Senior Petroleum Upstream Analyst with the Centre for Global Energy Studies (CGES) in London, told New Europe on 19 November the perception among traders is that if the conflict between Israelis and Palestinians would reach a final settlement or cease-fire in the next few days or weeks, then it would not affect the oil price.

But there is a small likelihood that Israel would use the Gaza conflict as an excuse to attack Iran, Takin said, reminding that Israel has said that Hamas fired Iranian-made rockets towards Tel Aviv. “If that happens then, of course, the price of oil would shoot up,” Takin said. “The fact that it hasn’t gone up at least so far is that probably the traders do not believe that will happen,” he added.