Israel-Hamas War Drives Surge In Crude Oil Prices. Heres What Lies Ahead

Since Israel or Palestine are not key oil players, there is no direct impact on crude oil supply and production. However, the war does sit in an important, wide oil-producing region, and Iran remains a key factor. Iran has long backed the Hamas militant group, and prices hinge on further escalation of the war, making it a wait-and-watch situation.

Prices could see an impact if Iran becomes involved in this situation, said Peter McGuire, chief executive officer at XM Australia, who expects higher prices until this situation eases. “Keep a close eye on (the) Strait of Hormuz.”

The Strait of Hormuz, located at the mouth of the Persian Gulf, serves as a crucial shipping route, handling approximately one-third of the world’s waterborne oil. With about 17 million barrels of oil transported through this passage daily, any escalation involving Iran poses a risk to the crude supply. Iran has a history of targeting merchant ships in this chokepoint and has previously threatened to block transit.

If Iran’s involvement in the attacks is officially concluded, Iran’s daily crude oil production of about 3.15 million barrels per day as of August stands at risk.

“There is sufficient capacity inside OPEC to cover the 3 million barrels of oil we lose if Iran is put under sanctions,” Lennox said.

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