Oil Prices Fluctuate on Continued Middle Eastern Turmoil

Fears and concerns that the unrest in the Middle East could spread to the larger Gulf region, which produces oil and endanger world output, have driven up oil prices before retreating on Tuesday. The price of the worldwide standard for crude oil, Brent, increased by about 5% on Monday during trade, erasing a portion of a sharp decrease in recent weeks that had thrilled many market observers and motorists. At the time of writing Brent crude is down 0.49% trading at $86.96 per barrel, and WTI crude is down 0.64% trading at $84.48 per barrel.

Due to its direct impact on input costs for goods like plastics and petrol, the price of crude oil has significant effects on the economy and consumers. Due to the dependence of numerous products on oil for both production and transportation, crude oil prices also affect the price of a far larger variety of items.

The Middle East tensions’ final impact on oil prices is yet unknown because a major increase would necessitate the spreading of the conflict to other regions of the Middle East. Fears of the worst-case scenario are causing the market to react: that a conflict in Israel would spread throughout the region and have an impact on the world’s oil trade.

There is a great deal of ambiguity. Market participants are uncertain of how this will ultimately turn out. Iran is a major source of worry since it supports the terrorist organisation Hamas, which recently launched an attack on Israel that left at least 900 people dead and 2,600 injured.

Although recent sanctions have limited Iran’s ability to produce oil, the country continues to do so and maintains control of the Strait of Hormuz, a trade route that allows for the transportation of around 15% of the world’s oil supply.

Crude oil prices would rise if the conflict were to spread beyond of Israel and the Gaza Strip, but petrol prices might not rise in tandem. The demand for petrol has decreased due to the seasonal shift from busy summer travel to relatively quiet autumn months. If oil prices continue to climb for an extended period of time, this decline in demand for petrol may assist keep petrol prices from rising.

But if oil prices remain high for a long time, petrol costs will eventually increase, necessitating exceptional measures.