Brent crude, a significant global oil price benchmark, experienced a decline but remained close to $90 per barrel. The anticipation of Iran’s actions had already caused prices to rise, with Brent crude reaching nearly a six-month high last week.
Market analysts are closely monitoring how the conflict might impact global supply chains. Oil price fluctuations have far-reaching effects worldwide, given the heavy reliance on oil for producing fuels like petrol and diesel. The increase in fuel and energy prices has been a major contributor to the rising cost of living globally in recent years.
In 2022, when Russia invaded Ukraine, oil prices surged to $120 per barrel due to supply concerns as Western nations imposed sanctions on Russia, a major oil exporter. This spike not only led to higher fuel prices but also affected various other goods as businesses adjusted prices to offset increased costs.
Analysts emphasize that Israel’s response to the attack will be crucial for global markets in the coming days and weeks. Israeli Defense Minister Yoav Gallant has indicated that the confrontation with Iran is ongoing, following Iran’s launch of drones and missiles towards Israel over the weekend in retaliation for an attack on its consulate in Damascus on April 1st.
While the price of Brent crude touched $92.18 per barrel at the end of last week, it fell back to around $89.50 on Monday. Similarly, the price of gold, often considered a safe investment during times of uncertainty, also declined after reaching a record high of $2,431.29 an ounce on Friday, dropping to $2,332.97 on Monday.
Energy analyst Vandana Hari noted that the decrease in oil prices suggests that the market does not currently perceive an additional threat to supply. However, Peter McGuire from XM.com predicts volatility in the energy market and expects oil prices to surge if Israel responds strongly to Iran’s actions.
April LaRusse, head of investment at Insight Investment, anticipates sideways trading in the markets until more information becomes available. In the Asia-Pacific region, share markets saw declines on Monday as investors assessed the impact of the attack, with the UK’s FTSE 100 share index also experiencing a slight fall.
Iran, the seventh-largest oil producer globally and the third-largest member of the OPEC oil producers’ cartel, holds a significant position in the oil market. Analysts highlight the potential impact on oil prices depending on whether shipping through the Strait of Hormuz, a vital shipping route where approximately 20% of the world’s oil supply passes, is affected. Iran’s recent seizure of a commercial ship with ties to Israel passing through the Strait of Hormuz adds further complexity to the situation
