Israel-Hamas Conflict Sparks Investor Reevaluation, Oil Prices Drop

Oil Prices Amid Israel-Hamas Conflict: Geopolitical Impact

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TOKYO, October 16 - Oil prices took a slight dip on Monday, following a surge in prices on Friday. Investors are closely monitoring the Israel-Hamas conflict, contemplating its potential ripple effects on global oil markets and the world economy.

Brent futures eased by 34 cents, a modest 0.4% decline, settling at $90.55 per barrel. Meanwhile, U.S. West Texas Intermediate (WTI) crude experienced a 0.5% decrease, falling 41 cents to $87.28 a barrel as of 0048 GMT.

The recent Friday rally saw both benchmark prices surging by nearly 6%, marking their most substantial daily gains since April. This surge was fueled by investor concerns over the possibility of a broader conflict in the Middle East.

For the week, Brent recorded an impressive gain of 7.5%, while WTI saw a notable climb of 5.9%.

Hiroyuki Kikukawa, President of NS Trading, a unit of Nissan Securities, commented, "Investors are closely monitoring the conflict, even though a large-scale ground assault has not commenced following Israel's 24-hour warning to residents in the northern half of Gaza to relocate to the south. The potential impact on oil-producing nations has already been factored into prices to some extent. However, should an actual ground invasion occur and disrupt oil supplies, prices could easily surpass the $100 per barrel mark."

It's worth noting that the ongoing Middle East conflict has had minimal effects on global oil and gas supplies, as Israel is not a major oil producer. Nevertheless, the conflict between Hamas and Israel presents one of the most significant geopolitical risks to oil markets since Russia's invasion of Ukraine last year, raising concerns about possible escalations involving Iran.

Market participants are closely assessing the potential implications for oil supplies in the world's top oil-producing region, including countries like Saudi Arabia, Iran, and the United Arab Emirates.

Israel's Prime Minister, Benjamin Netanyahu, has pledged to "demolish Hamas" as Israeli troops prepare to enter the Gaza Strip to pursue Hamas militants responsible for a deadly incursion into Israeli border towns.

Iran issued a warning on Saturday, cautioning that if Israel's "war crimes and genocide" continue, the situation could spiral out of control, leading to "far-reaching consequences."

With concerns of the conflict escalating, U.S. Secretary of State Antony Blinken is set to return to Israel on Monday for discussions on "the way forward" following several days of shuttle diplomacy with Arab states.

Adding some support to oil prices is the recent U.S. action imposing sanctions on owners of tankers transporting Russian oil priced above the G7's price cap of $60 per barrel. This move aims to close loopholes in the mechanism designed to penalize Moscow for its invasion of Ukraine. Russia is a significant global crude exporter, and heightened U.S. scrutiny of its shipments could potentially impact supply levels.

Source : Reuters (Reporting by Yuka Obayashi)