Attacks by the Palestinian militant group Hamas against Israel over the weekend have led to spiking oil prices and stock market fluctuations. The rising tensions in the Middle East create uncertainty around oil supply and stability in the region.
- Oil prices jumped over 4%, with Brent crude reaching $88 per barrel Monday after the attacks.
- In response, Israel launched targeted airstrikes against Hamas, regaining control of some areas. Stocks rose slightly after this news.
- If the conflict escalates further and spreads, the oil supply could face disruption, especially from Iran.
- The Israeli shekel fell by 2% at the market opening yesterday; the Bank of Israel plans to spend $45B to support the currency.
Why It Matters
The conflict comes at a precarious time for oil markets. Supply is already tight globally, with OPEC cutting production. The US and other countries banned Russian oil imports after it invaded Ukraine, disrupting supply chains.
Any disruption in oil exports from the Middle East could significantly impact prices and availability. Iran is a significant supplier, exporting 1.3 million to 1.8 million barrels daily. It could reduce this critical supply if exports are restricted due to rising Iran-Israel tensions.
While oil prices retreated slightly on Tuesday, the situation remains volatile. Continuous stability in the region will be critical to global economic health.
Will This Impact Gas Prices?
Skyrocketing oil prices would intensify inflationary pressures when the Fed is already battling high prices. However, reduced disposable income for consumers could dampen demand and help ease inflation. Gas prices at the pump have yet to see an immediate increase, with the average currently around $3.70 per gallon.
Experts say prices will likely continue falling in the short term unless tensions dramatically escalate. However, the Middle East situation remains highly fluid. The markets expect the conflict to remain contained, but a wider war could increase prices.