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Oil prices saw an uptick on Tuesday, driven by rising concerns over disruptions from the ongoing Iran-Israel conflict. However, major oil and gas infrastructure and supply flows have so far remained relatively unaffected by the escalating tensions.
Brent crude futures rose by $1.23, or 1.7%, to $74.46 per barrel as of 1023 GMT, while U.S. West Texas Intermediate (WTI) crude climbed $1.08, or 1.5%, to $72.85. Both contracts had risen more than 2% earlier in the trading session but also recorded declines before bouncing back in volatile market conditions.
Disruptions to Gas Production and Oil Depots
Although no significant interruptions to oil flows were observed, the conflict has caused some disruptions. Iran partially suspended gas production at the South Pars gas field, which it shares with Qatar, following an Israeli airstrike that caused a fire at the facility on Saturday. Additionally, Israel targeted the Shahran oil depot in Iran, adding to the supply concerns in the region.
Despite these localized disruptions, there is little appetite for shutting down key shipping routes like the Strait of Hormuz, as Iran would lose significant revenue, and the U.S. is keen on keeping oil prices low to combat inflation, according to analyst Hans Hansen.
Oil Tanker Collision Highlights Regional Risks
Adding to the tension in the region, two oil tankers collided and caught fire near the Strait of Hormuz on Tuesday. The incident highlights the risks faced by companies operating in the region, as electronic interference has surged, further complicating the safety of oil and fuel transportation in the area.
Oil Supply Remains Ample Despite Tensions
Despite the geopolitical uncertainties, there are signs that oil supplies remain plentiful. The International Energy Agency (IEA) revised its world oil demand estimate down by 20,000 barrels per day (bpd) from last month’s forecast. In contrast, it raised the supply estimate by 200,000 bpd, bringing it to a total of 1.8 million bpd.
Focus Shifts to Central Bank Decisions
Investors are also keeping a close eye on central bank decisions, particularly the U.S. Federal Open Market Committee (FOMC), which is set to meet later on Tuesday. The Federal Reserve’s interest rate decisions could significantly impact oil prices, especially amid broader economic concerns such as inflation and global demand.
Oil prices have rebounded amid the ongoing Israel-Iran conflict, though oil supplies appear to remain stable for now. While localized disruptions, such as the partial suspension of gas production and the targeting of oil depots, have caused some market concern, there is no indication that major shipping routes or oil flows have been heavily impacted. With lower demand expectations and increased supply forecasts, the focus now shifts to central bank decisions, particularly from the U.S. Federal Reserve, which could influence market sentiment and oil prices in the coming days.
