Tensions in Middle East send oil prices soaring on supply concern

Business a.m.

The sharp escalation of tensions in the Middle East sent oil prices soaring on Thursday as traders feared that a prolonged conflict could disrupt the flow of crude from the major export hub.

With jitters over the Middle East conflict sending shockwaves through the oil markets, U.S. crude futures jumped 2.2 percent to $71.61 a barrel while Brent futures ascended 1.9 percent to $75.33 a barrel.

With crude benchmarks steadily scaling upwards, traders are closely watching the unfolding tensions in the Middle East, bracing for Israel’s potential reaction to Iran’s provocative launch of over 180 missiles into its territory.

Against the backdrop of rising tensions in the Middle East, analysts from ING issued a cautionary note, warning that any potential Israeli counterstrike targeting Iranian oil facilities could send oil prices into a frenzy, with the extent of the price hike dependent on the scope and severity of the attack.

In their note, ING analysts highlighted the potential consequences of an Israeli strike on Iranian oil facilities, stressing that the fallout could be far-reaching given the country’s significant role as a major crude exporter, shipping an estimated 1.7 million barrels per day.

The analysts also noted that such a move might not be well-received by the United States, especially in the lead-up to the elections, and thus, a more limited response, such as targeting the launch sites used in the recent missile attack, could be on the table.

OPEC+, the  consortium of oil-producing nations, convened for a meeting on Wednesday, deliberating on the future of its output policy. After much consideration, the group ultimately decided to maintain the status quo, opting not to make any adjustments to its current approach.

In line with their previously agreed-upon plan, the alliance has resolved to incrementally increase their production by 180,000 barrels per day each month, a strategy that is set to take effect in December.

As Reuters reported, citing an OPEC+ source familiar with the discussions, the subject of the escalating geopolitical tensions in the Middle East was broached, though the overarching sentiment was one of “hoping for de-escalation.”

The source’s remarks underscore the complex nature of the situation, with the potential for the conflict to deepen, jeopardising the region’s oil supplies and heightening tensions even further.