Middle East Tensions Affect Oil Prices. Oil prices have sustained major spikes. This is due to increasing tensions in the Middle East, soaring prices past the threshold of US$90 per barrel.
The price of West Texas Intermediate (WTI) oil for the May 2024 contract rose 0.24% or 0.21 points to US$86.80 per barrel. Meanwhile, the price of Brent oil for the June 2024 contract also rose 0.42% or 0.38 points to US$91.03 per barrel.
Oil’s focus has now shifted to geopolitical risk adjustment, after Israel stepped up preparations to deal with Tehran’s potential retaliation for the attack on Iran’s diplomatic compound in Syria. It is feared that this will trigger a wider regional conflict.
Meanwhile, crude oil prices have also surged in 2024 as geopolitical concerns in the Middle East drive the market. This increase was also supported by reduced supply and higher-than-expected demand.
The conflict between Israel and Hamas has led to Houthi attacks on ships in the Red Sea. This attack has an impact on increasing transportation costs, but so far it has not turned into a wider war.
As tensions have escalated in recent days, this has led to a flurry of activity in the oil options market with bullish calls trading at rare premiums, to bears and market volatility soaring. Middle East Tensions Affect Oil Prices
Earlier this week, OPEC+ also voted to keep supply cuts in place in the first half of the year, keeping global markets tight and supporting the possibility of rising prices. These cuts were then also deepened by Mexico’s decision to limit some of its oil exports, which would further reduce volumes to the market.
Additionally, in recent weeks, market observers have also taken a more bullish view. JPMorgan Chase & Co. said Brent could potentially rise to as high as US$100 a barrel in 2024, if Russia’s decision to cut production was not matched by other countermeasures. ANZ Banking Group Ltd. also raised its three-month outlook to US$95 per barrel.
