- West Texas Intermediate crude for December delivery CL00, -0.60% CL.1, -0.60% CLZ23, -0.60% declined 0.7% to $87.49 per barrel on the New York Mercantile Exchange.
- December Brent crude BRN00, -0.41% BRNZ23, -0.41%, the global benchmark, dropped 0.5% to $91.74 per barrel on ICE Futures Europe.
Last week, both Brent and WTI saw an increase of over 1%, driven by concerns that the Israel-Hamas conflict might escalate and involve Iran, posing a threat to the crude supplies from the region. However, on Friday, crude prices fell after Hamas released two U.S. hostages.
Since the Oct. 7 attack on southern Israel by Hamas, which resulted in over 1,400 casualties and more than 220 hostages, oil futures have been on the rise.
As the death toll in the Gaza Strip exceeded 4,600 over the past two weeks, Israel stepped up its aerial bombing campaign. Although a ground incursion into the enclave was expected, Israel has yet to execute it. The situation in Gaza is dire, with the region facing a humanitarian crisis. Over the weekend, aid shipments arrived in Gaza.
Analysts and Traders Predict Volatility Amidst Iran Concerns
Analysts and traders are anticipating continued volatility in the oil market due to lingering fears of potential spillover involving Iran. The reemergence of Iran as a key player in crude exports, coupled with the possibility of a worst-case scenario in which the Strait of Hormuz is closed, has experts warning of even greater effects on global crude prices.
Impact on Iran’s Crude Exports
Experts suggest that Iran’s crude exports have rebounded to approximately 2 million barrels per day, following their decline due to sanctions imposed by the Trump administration in 2018. In the event of a conflict involving Iran, the country’s crude exports could once again face scrutiny, possibly leading to further price fluctuations.
The Worst-Case Scenario
Analysts caution that if Iran were to close the Strait of Hormuz, a vital passage for oil transportation, the impact on crude prices would be magnified. Such a move would severely disrupt global oil supply chains and send shockwaves through the market.
Supply-Side Concerns Drive Crude Price Rally
The recent surge in crude prices can largely be attributed to concerns over supply-side issues. Many experts fear that an extended war escalating across the Middle East would result in a reduction of global oil supply. The implications of this have propelled the rally in crude prices.
Easing Tensions, but Uncertainty Persists
Recent diplomatic developments have provided some reprieve from escalating tensions, offering hope for a de-escalation of the conflict. However, the situation remains highly volatile, meaning that oil prices are likely to stay supported and influenced by upside risks.
In conclusion, analysts and traders anticipate ongoing volatility in the oil market as concerns involving Iran persist. While recent diplomatic efforts have eased tensions to an extent, uncertainties remain, and oil prices will continue to be impacted by supply-side worries and potential escalation in the Middle East.