Since the Middle East is a central oil-producing region, geopolitical conflicts can significantly impact global oil prices due to concerns about supply disruptions. For example, here are some of the significant complexities and potential consequences of the current Israel-Hamas conflict on global oil prices…
- Oil and natural gas prices jumped after Hamas’s surprise weekend attack on Israel, and Israel’s potential response risked stoking instability in the oil-rich region.
- Brent crude, the international benchmark, climbed 4% toward $88 a barrel. U.S. marker West Texas Intermediate rose 4%, topping $84.50 a barrel. At the same time, European natural gas futures leaped 14% to above €43 per megawatt-hour.
- Ironically, Israel and Palestine aren’t significant oil producers or exporters. IEA data shows Palestine produces zero oil, while Israel produces about 300,000 barrels daily, a drop in the bucket compared to Azerbaijan’s 843,000 daily barrels.
- So why the vast concern? The main problem is the potential involvement of Iran. If the U.S. government and its Western allies officially link Iranian intelligence to the Hamas attack, Iran’s oil supply and exports could face significant risks, leading to higher oil prices internationally. Iran’s oil exports have been constrained since the U.S. withdrew from the nuclear accord and re-imposed 2018 sanctions.
- The Strait of Hormuz, a crucial oil chokepoint, could also see massive disruptions. And if the conflict escalates regionally or involves the Lebanese militant group Hezbollah, it could lead to more significant supply issues and higher oil prices.
Now, I’ll be the first to tell you I’d rather not have war in the Middle East. Hatred, war, thousands of civilians dead in the past week, that’s not the news I want to wake to.
But since we can’t stop the war, we might as well channel our energy to investing opportunities that compound our wealth faster than traditional buy-and-hold investments.
See which oil and gas ETF to trade for 2-3x more returns on your money this month.