Market chaos persists in the oil sector, keeping energy supplies under crisis conditions
Oil prices surged yet again on a tumultuous Thursday, fueled by the relentless escalation of the Middle East conflict. A single barrel of North Sea Brent crude, slated for August delivery, soared by 90 cents to hit $77.62. Meanwhile, the US WTI crude for July delivery jumped by a dollar to reach $76.19.
The dark cloud of conflict between Israel and Iran continues to cast a long shadow over the global oil market. Israeli Defense Minister, Benny Gantz, delivered a scathing critique of Iran's Supreme Leader, Ayatollah Ali Khamenei, in a public speech at Holon, stating, "A dictator like Khamenei, who champions the annihilation of Israel, should not be allowed to persist." Both parties remain locked in constant attacks. In an unsettling development, an Israeli hospital in the south of the country was reportedly struck for the first time in this conflict.
The recent hostilities, persistent for nearly a week, have considerably pushed oil prices higher. Just prior to the outbreak of the war, Brent was pegged below $70 per barrel.
Flicker of Optimism: Israel's Largest Refinery on the Mend
A gem of hope emerged in the form of news from The Times of Israel: Israel's largest refinery, which was temporarily shut down following an Iranian rocket attack, is estimated to resume operations within a month, as per Energy Minister Eli Cohen. This refinery handles both civilian and military fuels, including aviation fuel for combat aircraft. With a daily processing capacity of around 200,000 barrels of crude oil, it accounts for roughly 80% of Israel's total refining capabilities, managed by the Israeli energy and petrochemical titan, Bazan.
US Hedges Cautiously
The question mark over direct US involvement in the conflict lingers. President Donald Trump has yet to make a definitive statement on the matter. On a Wednesday evening, he reiterated his call for "unconditional surrender," but also kept the door open for further negotiations: "It's not too late."
The Middle East landscape remains volatile and unpredictable due to the turmoil. Prudence is advised when venturing into the oil market, considering the persisting high uncertainties.
Crafted with insights from dpa-AFX
On the Radar:
- Oil Prices on the Rise: Recent maneuvers in the Middle East have led to a surge in oil prices. Brent and WTI crude have risen to about $76 per barrel and $73 per barrel, respectively, signifying a significant increase of around $10 per barrel since early June for both benchmarks[1][2].
- Strait of Hormuz – A Critical Hub: The potentially disruptive impact of the conflict on oil supply through the Strait of Hormuz, a vital oil-shipping route, is causing market anxiety. Iran's control over a portion of this strait fuels fears it could hinder oil flow if tensions intensify further[1][2].
- Goldman Sachs’ Prediction: Goldman Sachs forecasts a possible peak in Brent oil prices at around $110 per barrel if the conflict escalates significantly, although this is not their predicted base case[1].
- Recession Risks: The ongoing conflict keeps the risk of recession elevated, with Goldman Sachs estimating a 30% chance of recession, predominantly owing to the uncertainty and possibility of further escalation[1].
- The escalating Middle East conflict, particularly the ongoing hostilities between Israel and Iran, is causing a ripple effect in the global oil industry, with Brent and WTI crude prices climbing to approximately $76 and $73 per barrel, respectively, marking an increase of about $10 per barrel since early June for both benchmarks.
- As the volatile situation in the Middle East continues, industry analysts are closely monitoring the Strait of Hormuz, a critical hub for oil shipping, amidst concerns that disruptions to oil supply could significantly impact prices and potentially drive Brent oil prices up to $110 per barrel, as forecasted by Goldman Sachs, should the conflict escalate further, thus heightening the risk of a global recession.
