Crude Oil Prices Could See Temporary Spike Due to Israel-Palestine Conflict

According to energy experts, the recent attack by Palestinian militants Hamas on Israel is likely to have limited overall impact on crude oil prices, as long as the conflict does not escalate further. Vandana Hari, CEO of Vanda Insights, stated that there may be a temporary surge in crude prices when markets open on Monday, but added that the risk premium will be factored in until it is clear that the event will not disrupt oil and gas supplies in the Middle East.

The infiltration of Israel by Hamas militants occurred during a major Jewish holiday and followed the firing of thousands of rockets into Israel from Gaza. Israeli Prime Minister Benjamin Netanyahu reported abductions, deaths, and destruction caused by the incursion.

“The impact on the oil price will be limited unless we see the ‘war’ between the two sides expand quickly to a regional war…” – Iman Nasseri, Facts Global Energy

Israel has initiated an offensive phase and vowed to continue until its objectives are achieved. As a result, the country has cut off the supply of electricity, fuel, and goods to the Gaza Strip, where 2.3 million Palestinians reside. Reports indicate casualties on both sides, with hundreds of Israelis killed or injured and numerous deaths and injuries recorded in Gaza.

How much oil is involved?

While Israel and Palestine are not major oil producers, the conflict takes place in a key oil-producing region. Analysts warn of its potential to escalate further. Hari highlighted that although oil production and supply are not directly impacted, the conflict is occurring near an important oil-producing and exporting region. Israel has two oil refineries with a combined capacity of nearly 300,000 barrels per day, but it has minimal crude oil and condensate production. The Palestinian territories do not produce oil.

“It has the potential to widen into regional hostilities.” – Vandana Hari, CEO of Vanda Insights

Market experts agree that unless the conflict expands into a regional war involving major players like the U.S. and Iran, the impact on oil prices will remain limited in the short term. Pierre Andurand, a French businessman and hedge fund manager, suggests that although a significant oil price spike is not expected in the coming days, it could eventually affect supply and prices. He also notes that global oil inventories are low, and production cuts by Saudi Arabia and Russia will lead to further inventory reductions in the coming months. However, Hari warns that the Israeli-Palestinian conflict has the potential to escalate into regional hostilities.

Recent attacks by Lebanon’s Hezbollah militant group on Israeli sites near the Lebanese-Syrian border have added to the tensions in the region.