Athira Sethu
Kochi, 2 October 2024
Crude oil prices jumped nearly 1% in on Wednesday as fears of escalation rose between Iran and Israel. On Tuesday, oil prices gained more than 2% after Iran launched a volley of missile attack on Israel. Brent crude was trading at $73.84 at 11.43 PM US time.
The situation remained tense as Israel Prime Minister Benjamin Netanyahu vowed retaliation. Iranian authorities have also issued threats of future attacks if Israel retaliates.
Earlier, many Asian and European markets fell as investors remained cautious about the outcome of such escalation in the Middle East region.
The US equity market, meanwhile, remained rangebound with marginal gains amid escalating Middle East tensions. S&P index remained almost flat, while Nasdaq Composite was trading 0.2% up in the mid-noon trade.
Among global indices, China remained the only outlier. Chinese shares traded with gain post the government’s announcement of stimulus measures in recent weeks.
Analysts fear that any retaliation by Israel could see attack on the oil rich region of Iran. If that happens, then global oil supply situation will worsen.
Iran ran holds 10% oil and 15% of the world’s natural gas resources. It is OPEC’s second largest oil producer and world’s fourth largest oil producer.
In August, Iran produced 3.7 million barrel per day of crude oil. So, any disruption to Iranian oil production may pose threat to global supply, pushing up the prices.
Moreover, the Strait of Hormuz may see supply disruption in case the war widens. This is one of the most important sea passage through which billions of shipping trade passes. So, any wider conflict can endanger the trading in this region.
Any price surge in oil doesn’t augur well to developed and developing economies, which are showing early signs of recovery. Moreover, amid Russia-Ukraine conflict, the world can ill-afford another war in the Middle East region.
