While the situation is primarily based on territorial, political, and religious differences, the Israel-Hamas conflict has sparked reverberations that extended into other topics, especially the oil geopolitics of Saudi Arabia and global oil prices in general. Many questions are raised in economic circles, particularly in the oil sector, including the implications of the conflict in the oil industry and how the Israel-Hamas situation differs from the Russian-Ukrainian conflict.
The global energy industry has not yet recovered from the challenges caused by the Russian-Ukrainian war, which is still ongoing today. The escalating situation in the occupied Palestinian territories is threatening to destabilize the Middle East region, which is why many economic circles worldwide are watching the conflict on close alert.
Eyes on OPEC
OPEC, short for Organization of Petroleum Exporting Countries, is being watched by the world today, as it’s currently the center of the oil industry. OPEC is a pivotal force in the global oil market, so many people are waiting for its response to the conflict and the supposed problems it might cause the oil industry and global oil prices.
However, it seems like it’s taking its time sending out a response because it’s still monitoring the situation closely. In the event of a ground invasion into the Gaza Strip and an extended conflict, the impact on oil prices and the general response of OPEC would depend on the reach and scale of the conflict.
For instance, if the conflict stays localized without affecting many major transit routes and major oil producers, prices may only have limited immediate changes.
What Other Factors Could Effect Global Oil Prices?
Another critical factor that could potentially have a significant effect on global oil prices is whether the conflict spreads between Iran and Hezbollah, a Lebanon-based group that is an ally of both Hamas and Iran.
On Monday, Hezbollah said it fired a barrage of rockets after three of its members had died due to an Israeli bombardment, making the border tension more palpable. On the other hand, Iran denied its involvement in Hamas’ surprise attack on Israel, following a report from Wall Street that Iranian security officials were involved in helping Hamas plan their assault.
Iran’s Involvement
In 2018, former president Donald J. Trump reimposed sanctions on Iran’s oil industry. However, in 2022 and 2023, Iranian exports and output rose while Washington and Tehran resumed talks about the Islamic Republic’s controversial nuclear program.
That said, any evidence of Iranian involvement in the recent Hamas attack will prove detrimental for Iran since it might lead to further sanctions from the US. The recent jump in oil prices is the oil market itself being concerned about the Israel-Hamas conflict, which could become a much wider one. If this happens, significant players in the Middle East would likely get involved using their proxy agents.
What Happened in the Previous Palestine-Israel Conflicts
With the current price jump in global oil prices due to the Israel-Hamas conflict, many experts were reminded of the 1973 oil prices that followed the October War when Syria and Egypt launched an assault to claim territory in Israel.
Like the recent attack by Hamas, the war began 50 years ago on a Jewish holiday and caught Israeli forces by surprise. The US supported Israel, and in retaliation, Arab oil-producing countries cut oil production and even placed embargoes on the US and some of its closest allies, which caused the prices of oil to quadruple.
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Many experts seemed to be worried that this might happen again with the current Israeli-Hamas conflict. However, the situation today was different back then. Experts said that there is a near-zero probability of the prices skyrocketing again. After the cut in production and countless embargoes, OPEC concluded that the action was a huge mistake because of the decades of ill will from major oil-consuming nations that followed.
The Russia Factor
In the Russian Energy Week back on Wednesday, Russia and Saudi Arabia discussed the global oil prices situation in the Israel-Hamas conflict. OPEC’s response to Israel-Hamas will vastly differ from their response to the Russian-Ukrainian war.Â
While OPEC aims towards a non-political oil strategy in collaboration with Russia, the Israel-Hamas conflict wouldn’t likely have a much more significant move as the conflict might not involve other oil nations and critical routes. But with OPEC’s response still upcoming, the world has no choice but to wait to see what effect it has on global oil prices.
Final Words
To avert a much bigger conflict, the international community must prioritize diplomacy as a means to end the conflict. These are efforts to ensure that the passage of oil and the security of vital oil supply chains will remain safe and be free of further disruptions as it’s still recovering from the effects of the Russian-Ukrainian war.
