Brent, WTI prices rise after Hamas attack on Israel


  • Oil prices rose on Monday as the Israel-Hamas conflict continued for a third day following a surprise attack on Israel by Palestinian militants Hamas.
  • “For this conflict to have a lasting and meaningful impact on oil markets, there must be a sustained reduction in oil supply or transportation,” said Vivek Dhar, director of mining and energy commodity research at the Commonwealth Bank.

The processing plant is illuminated with lights at the Persian Gulf Star Company (PGSPC) gas condensate refinery in Bandar Abbas, Iran, on Wednesday, Jan. 9, 2019.

Bloomberg | Bloomberg | getty images

Oil prices rose 4% as the Israel-Hamas conflict escalated into a third day after a surprise attack on Israel by Palestinian militants Hamas.

Global benchmark Brent was trading 4.53% higher at $88.41 a barrel on Monday, while US West Texas Intermediate futures rose 4.69% to $88.67 a barrel.

At dawn on Saturday during a major Jewish holiday, the Palestinian militant group Hamas began a multi-pronged incursion into Israel by land, sea and air using paragliders. The attack came hours after thousands of rockets were fired from Gaza into Israel.

According to NBC News, at the time of publication, at least 700 Israelis were reportedly killed. Meanwhile, the Palestinian Health Ministry has recorded 313 deaths so far.

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Oil prices rise after Hamas attack on Israel

Although there is a bounce in crude oil prices, analysts believe this will be a quick reaction and will likely be temporary.

“For this conflict to have a lasting and meaningful impact on oil markets, there must be a sustained reduction in oil supply or transportation,” said Vivek Dhar, director of mining and energy commodity research at the Commonwealth Bank.

“Otherwise, and as history has shown, positive oil price reactions are temporary and easily outweighed by other market forces,” he wrote in a daily note. He said the conflict does not directly threaten any major source of oil supply.

Neither party is a major oil player. Israel has two oil refineries with a combined capacity of about 300,000 barrels per day. According to the US Energy Information Administration, the country claims “virtually no crude oil and condensate production.” Similarly, EIA data shows that the Palestinian territories produce no oil.

However, the conflict is on the doorstep of a major oil producer and export region for global consumers.

On October 8, 2023, a volley of rockets was fired from Gaza City towards Israel by Palestinian militants.

Mohammad Abid AFP | getty images

And oil-rich Iran looms large as the market’s immediate concern.

“If Western countries officially link Iranian intelligence to the Hamas attack, Iran’s oil supplies and exports face imminent downside risk,” Dhar said.

Oil exports from Iran have been limited since former US President Donald Trump pulled out of the nuclear deal in 2018 and reimposed sanctions aimed at reducing Tehran’s revenues.

“Under US incentives and secret nuclear talks, Iran could see its oil exports and production increase by about 600-kb/d to 3.2-m production between late 2022 and mid-2023,” Citi said in a note. “

There are concerns that the conflict could spread to the region.

“There is also a risk of conflict escalating at the regional level,” Henning Gloystein, director of energy, climate and resources at Eurasia Group, told CNBC. “If Iran is included, there could also be supply issues, although we are not yet at that level.” But we are not.” an email.

Lebanese militant group Hezbollah said it carried out attacks on three sites in Shebaa Farms – a strip of land that lies at the intersection of the Lebanese-Syrian border and the Israeli-occupied Golan Heights.

Josh Young, CIO of energy investment firm Bison Interests, said if the US imposed sanctions on Iranian exports it could have a “pretty dramatic impact on the oil market”. “I think it’s fair to look at oil, let’s say, [up] About $5 for WTI,” he estimates.

With 40% of the world’s exports passing through the Strait of Hormuz, Rapidan Energy Group Chairman Bob McNally estimates that a conflict between Israel and Iran could easily increase oil prices by $5 to $10. The strait is considered the world’s most important oil transit chokepoint, and is located between Oman and Iran.

However, investors don’t just have to keep an eye on Iran.

McNally also told CNBC’s “Street Science Asia” that crude oil prices could go “much higher” if Lebanese terrorist group Hezbollah is involved.

“The way this becomes a bona fide problem for the oil market, and contributes to a much larger increase, is if the market believes that the fighting will spread to Hezbollah in Lebanon,” he said.

US Secretary of State Antony Blinken on Sunday noted “limited firing” between Lebanon-based Hezbollah and Israel, but said that “so far, it’s quiet, but it’s something we’re watching very carefully.”

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