The great fear of the global economy is that Israel and Iran will end up in direct confrontation, which would push the US into the conflict

The impact of the Israel-Hamas war on the oil market

PHOTO / AFP - Un petrolero amenaza con explotar o derramar más de un millón de barriles de petróleo en el Mar Rojo
PHOTO / AFP - For the time being, crude oil prices have already seen a rise over the past week in the wake of the outbreak of the war

The ongoing conflict between Israel and the Hamas terrorist group is destabilising the troubled Middle East region. The consequences of the war have also reached Europe, where countries have increased anti-terrorism levels and tightened security in Jewish centres.

However, this conflict is also having an impact on the economy and energy markets, just as it did after Russia's invasion of Ukraine. Recently, the managing director of the International Monetary Fund, Kristalina Georgieva, has expressed concern about how international oil markets will be affected by the war. Especially if the US and Iran become more directly involved in the conflict, as, according to Georgieva, there would be significant disruptions in oil supplies.

For the time being, crude oil prices have already seen a rise over the past week in the wake of the outbreak of the war, while Shell shares gained 1.5%, which has increased the value to 2,763 per share. Meanwhile, Brent crude oil has risen more than 7% since the start of the conflict, reaching $90 a barrel.

The International Energy Agency has qualified that while the conflict between Israel and Hamas had not yet had a direct impact on physical supply, the energy market would "remain on edge" as the crisis unfolded.

In this regard, Bloomberg Economics stressed that the great fear of the global economy is that Israel and Iran will end up in direct confrontation. At the moment, Iran only finances terrorist groups that attack Israel, such as the Palestinian Hamas or the Lebanese Hezbollah. However, Tehran has threatened to intervene in the war if the Israeli army does not cease its offensive on the Gaza Strip, something that could also draw the United States into the conflict. In this regard, there is particular concern that Tehran may decide to close the Strait of Hormuz, through which at least 20% of the world's crude oil passes.  

Mapa que muestra el Estrecho de Ormuz
AFP/AFP -  Strait of Hormuz

If this were to happen, the economic portal estimates that oil prices would soar by more than 70%, reaching 150 dollars per barrel. The price currently stands at 90 dollars. Bloomberg experts do not believe that the impact on the value of crude oil would not be as severe as that experienced during the 1973 oil crisis, when the Organisation of Arab Petroleum Exporting Countries suspended exports to countries that had supported Israel during the Yom Kippur war, a conflict initiated by surprise by Egypt and Syria. However, they do believe that it could be compared to the increase experienced after Iraq's invasion of Kuwait in 1990.

This sharp rise could also impact GDP growth, causing it to fall by 3 per cent this year. It would also increase the rate of inflation, as a rise in the value of gasoline would increase the cost of shipping goods, affecting supply chains and pushing up prices. 

PHOTO/FILE -  The energy market would "remain on edge" as the crisis unfolded

Despite the war, certain energy agreements are still going ahead 

In addition to the political consequences, the conflict between Israel and Hamas may affect regional energy agreements. In this regard, BP and the Emirati state oil company ADNOC plan to acquire a 50 per cent stake in the Israeli gas producer NewMed Energy. However, as BP representatives have assured Reuters, the prospects for the deal remain on track.

This proposed ADNOC and BP project reflects the cooperation and growing economic ties between Israel and the United Arab Emirates following the normalisation of relations in 2020 through the Abraham Accords. A source close to ADNOC revealed to the news agency the company's commitment to the deal, emphasising that they see value in it. 

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