Oil prices rose in response to the escalation of the Middle East conflict over the weekend, although the price increase at the beginning of the week was limited. The price of Brent oil rose briefly to $73 per barrel, but then shed its gains again, Commerzbank’s commodity analyst Carsten Fritsch notes.
The impact on oil supply to remain limited
“The start of an Israeli ground offensive in southern Lebanon, which was reported this morning, also had little impact on the price. Apparently, the market does not expect the increased tensions in the Middle East to affect oil supply in the foreseeable future. The killing of the leader of the Shiite terrorist militia Hezbollah by a targeted rocket attack by Israel in Beirut has certainly further intensified tensions in the region.”
“Iran, which supports Hezbollah in Lebanon financially and militarily, has so far avoided announcing a retaliatory attack. It appears that Iran is not interested in a military confrontation with Israel at present. It is also consistent with this that there has not yet been a retaliatory attack in response to the killing of a high-ranking Hamas leader in Tehran at the end of July, for which Israel is being blamed.”
“Provided that there is no direct confrontation between Iran and Israel, the impact on oil supply should remain limited. Consequently, there is no reason to add a larger risk premium to the oil price. The muted reaction of the oil market to the latest events is therefore reasonable. However, this does not mean that a situation cannot arise that would require a reassessment of the situation. The news from the Middle East should therefore continue to be watched closely.”
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