Oil Prices Soar Due to Hamas Attacks. World oil prices have risen more than 3 percent after Hamas’ surprise attack on Israel which affected tensions in the Middle East.
It is known that West Texas Intermediate (WTI) oil traded above US$85 per barrel in early Asian trade, as the war risk premium re-entered the market. Traders are also worried that the escalation of violence currently occurring in the Middle East could trigger a more destructive proxy war, involving the United States (US) and Iran.
The latest events in Israel do not pose an immediate threat to supplies. However, any possibility of retaliation against Iran amid reports that the Islamic Republic was involved in the attack would raise concerns over the Strait of Hormuz.
Meanwhile, the Strait of Hormuz is an important shipping lane that Tehran previously threatened to close, when the United States (US) sent warships to the region.
London’s WTI and Brent futures contracts have slumped in October 2023, with a drop of US$10 per barrel. This decline occurred due to concerns about the economy around the world and high interest rates which made the demand outlook less clear.
These concerns then overshadowed the bullish conditions that made oil prices strengthen in the third quarter of 2023, as the physical balance tightened due to continued cuts in crude oil production led by Saudi Arabia.
Oil Prices Soar Due to Hamas Attacks. Oil market watchers will then be watching for signs of a broader impact, involving the US and Iran after months of improved relations.
Iran has been exporting more oil in recent months, which may have contributed to the moderation in global prices. Iran also struck a rare prisoner swap deal and freed up billions of dollars in frozen funds from previous oil sales.