Surging Global Oil Prices Amid Israel-Hamas Clash... "Increasing Uncertainty in the World Economy"

Past Cases Show Short-Term Rise Followed by Stabilization
Oil Price Increase Hinges on Escalation
Possibility of Escalation Rises if Iran Intervenes

The armed conflict between Israel and the Palestinian militant group Hamas has caused international oil prices to surge, raising concerns about increased uncertainty in the global economy.

On the 9th, the International Finance Center emphasized in its report titled "Outbreak and Assessment of the Israel-Hamas Armed Conflict" that "following the Russia-Ukraine war, the recent escalation of geopolitical risks originating from the Middle East has led to a sharp rise in international oil prices, heightening uncertainties in the global economy and international financial markets. Therefore, it is necessary to remain vigilant and closely monitor the situation."

According to major foreign media such as the British BBC, West Texas Intermediate (WTI) crude oil futures rose 4% compared to the previous day, trading above $86 per barrel. Although Israel and Palestine are not oil-producing countries and thus have limited direct impact on international oil prices, concerns about the conflict expanding grew among traders after reports emerged that Iran was behind Hamas's attack.

The impact on international oil prices depends on whether the conflict escalates. The International Finance Center explained that if other Middle Eastern oil-producing countries become involved in the conflict or if oil production facilities and transportation routes are compromised, there is potential for a sharp increase in oil prices.

The center added, "If there is retaliation following Israeli civilian casualties, expanded involvement of Shiite militant groups such as Hezbollah, and attacks by Iran, which is presumed to be the backer, the conflict could last longer than expected and the nature of the war could intensify."

According to BBC, Saul Kavonic, an energy analyst at Credit Suisse, stated, "If Iran, suspected to be behind Hamas's attack, intervenes in this conflict, up to 3% of the world's oil supply could be at risk."

However, looking at past conflicts between Israel and Arab countries, most ended within a short period, and their impact on international oil prices was limited, with prices stabilizing after a short-term spike except during the first and second oil shocks.

Nonetheless, this situation is unusual in many respects, making its development uncertain. The International Finance Center explained that the future direction is uncertain due to factors such as ▲the unprecedented large-scale shelling and border infiltration by Hamas ▲Israel's declaration of war and strong retaliatory threats ▲the involvement of other Shiite militant groups (Hezbollah, Houthis) ▲and the fact that this occurred during a period of reconciliation in the Middle East.

The International Finance Center stated, "With global oil supply and demand tight due to production cuts by Saudi Arabia and Russia, and U.S. strategic petroleum reserves at their lowest level in 40 years, if a supply shock originating from the Middle East is added, the recent strong trend in international oil prices could be further reinforced."