Rising Tensions Ignite Global Concerns About Energy Supplies
November 03, 2024
11:23 AM
Reading time: 3 minutes
A subtle shift in the global oil market has caught the attention of analysts and observers alike. As rumors of a potential Iranian response to Israel's recent retaliatory strikes grow louder, the price of oil has surged, reflecting the uncertainty that looms over the Middle East.
By Friday morning, the cost of Brent crude oil had climbed to $74.64 per barrel, up from $72.31 on Thursday and $70.90 earlier in the week. This significant increase of over $2 per barrel underscores the market's sensitivity to geopolitical tensions.
Ashley Kelty, research director at Panmure Liberum, noted, "It appears that markets have been too quick to write down the war premium for the Middle East, and the rise on Thursday reflects this...while the impact of the attacks would be on the smaller scale, the potential to drag Iraq into the equation for the conflict would open up scope for future attacks which could damage Iraqi energy infrastructure and disrupt supplies."
The anticipation of Iranian actions has also influenced oil stocks, with major companies like Shell and BP seeing over a 1% rise as crude prices climbed approximately 3%.
Analysts caution that the upcoming U.S. presidential elections may further influence oil prices. Mukesh Sahdev from Rystad Energy remarked, "Several international events have converged at the turn of the month that could see oil markets in for a bumpy ride in early November."
Amidst these developments, the International Monetary Fund (IMF) released a report highlighting the sluggish economic growth in the Middle East and North Africa (MENA) region, projected at 2.1% for this year. Factors contributing to this slowdown include ongoing conflicts and prolonged OPEC+ oil production cuts.
The IMF expressed concerns over high uncertainty in the near and medium term, with risks such as escalating conflicts, increased geo-economic fragmentation, and commodity price volatility.
The report anticipates a rebound in economic growth next year, contingent upon OPEC+ reversing production cuts and easing headwinds from conflicts. However, the IMF revised down its near-term outlook for 2024 and 2025, reflecting the extension of voluntary oil production cuts by several countries in the region.
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