Brent Oil Surges Early in Trading
"US Iran Sanctions Measures Are a Variable"
As geopolitical conflicts in the Middle East escalate, including the death of U.S. troops and attacks on oil tankers, international oil prices have been fluctuating on the 29th (local time), Bloomberg reported.
Amid ongoing attacks by pro-Iran armed groups against U.S. forces in the Middle East, three U.S. soldiers were killed in a drone attack at a U.S. military base in Jordan. U.S. President Joe Biden issued a statement on the 28th saying, "We will hold those responsible for this attack accountable at a time and in a manner of our choosing." This is the first incident of U.S. military deaths since the outbreak of war between Israel and the Palestinian armed faction Hamas. Meanwhile, the Iranian delegation stated on the same day that it was not involved in this attack.
Additionally, on the 27th, the Houthi rebels fired anti-ship missiles in the Gulf of Aden, connected to the Red Sea, attacking a British oil tanker. This is the first time the Houthi rebels have attacked an oil tanker.
Brent crude surged 1.5% early in the Asian market opening but was trading around $83.32 per barrel by 3 p.m. local time. West Texas Intermediate (WTI) crude rose to $79 during the session before falling back to $78.39.
This reflects the heightened geopolitical tensions in the Middle East. Vishnu Varathan, Chief Economist for Japan and other Asian markets at Mizuho Bank, said, "The oil market is exposed to supply-side risks," adding, "Despite demand easing, geopolitical tensions appear to be exerting additional upward pressure on oil prices."
Bloomberg particularly analyzed that with the first U.S. military deaths in the Middle East since the Israel-Palestine war, President Biden is under strong pressure to confront Iran directly. This implies that conflicts at a key global trade hub could intensify further.
Meanwhile, Brent crude has risen about 9% this month amid Middle East tensions but has not reached the levels seen immediately after Hamas's attack on Israel in October. Bloomberg explained that strong supply outlooks from non-OPEC (Organization of the Petroleum Exporting Countries) producers and a slowdown in demand growth have helped contain prices. Also, although the Houthi rebels' attack in the Red Sea caused some shipping route changes and increased logistics costs, there has not yet been a supply shortage or impact on production.
Experts believe the impact of this series of events is currently limited. John Kilduff, founding partner of Again Capital, said, "No one wants a full-scale war," adding, "Oil is still flowing, oil fields are not threatened, and ships are still passing through the Suez Canal." Neil Beveridge, senior analyst at Sanford Bernstein, told Bloomberg, "The biggest variable is whether the U.S. and its allies decide to take stronger measures against Iran, whose oil exports have increased by 1.5 million barrels per day," noting, "If sanctions are tightened again, it could put upward pressure on oil prices."
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