Oil prices soar by over 4.5% amid Israel-Palestine war: What you need to know
The conflict began on October 7, when Hamas, a Palestinian militant group, launched a rocket attack on Israel. Image: AP/Fatima Shbair
Oil prices surged by over 4.5% on Monday, October 9, amid the ongoing conflict between Israel and Palestine. The conflict has raised concerns about a wider war in the Middle East, which could disrupt oil supplies.
The conflict began on October 7, when Hamas, a Palestinian militant group, launched a rocket attack on Israel. Israel retaliated with airstrikes on Gaza. The violence has since escalated, with both sides suffering heavy casualties.
What happened
- Oil prices experienced a substantial spike of more than 4% following Hamas's launch of one of the most substantial military attacks on Israel in decades.
- This surprise attack on Israel over the weekend, coupled with the ongoing Israel-Hamas conflict, has led to a notable increase in instability in the Middle East—a region responsible for almost a third of global oil production and supply.
- Early Asian trading on Monday witnessed a surge in oil prices, with Brent crude rising by $4.18 or 4.94% to reach $88.76 per barrel, while US West Texas Intermediate crude climbed to $87.02 a barrel, marking a rise of $4.23 or 5.11%
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West Texas Intermediate surpassed the $86-per-barrel mark as markets factored in a risk premium due to the war.
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Although the conflict in Israel does not pose an immediate threat to oil supply, there is a potential for the Israel-Hamas war to escalate into a more destructive proxy war, possibly involving the US and Iran. Any potential retaliation against Tehran, amid reports of its involvement in the attacks, could jeopardize the passage of vessels through the Strait of Hormuz—a vital conduit that Iran has previously threatened to close.
- Analysts at ANZ Group Holdings Ltd, Brian Martin, and Daniel Hynes, emphasized the significance of whether the conflict remains contained or expands to involve other regions, particularly Saudi Arabia. They noted, "Initially, at least, it seems markets will assume the situation will remain limited in scope, duration, and oil-price consequences. But higher volatility can be expected."
- Prior to the attack on Israel, both WTI and the global benchmark Brent futures had experienced a decline this month, with prices dropping by approximately US$10 per barrel.