Just when the global crude oil market was beginning to stabilise after pandemic and Russia-Ukraine war, another armed conflict has rattled the sensitive matrix.
The impact of the ongoing Israel-Hamas conflagration on crude oil prices has started to be felt.
Following the conflict in the West Asia theatre, crude oil prices touched US$91 per barrel on October 16.
Crude oil is the primary source of energy for major developed and developing economies. Any price rise impacts a host of other items and commodities, thus feeding into inflation.
The terrorist attack of Hamas on Israel and the subsequent military action by the Jewish state in the pursuit of terror hideouts in Gaza has the propensity to unshackle the crude oil supply chain and send prices in a spin if the conflict rages on.
Although the crude prices have started to move North, yet it has not attained the peak seen in the aftermath of the Russia-Ukraine conflict, which started in February 2022.
Considering that Middle East or West Asia accounts for a third of total global oil supplies, the Israel-Hamas faceoff could beget similar consequences sooner than later.
Meanwhile, the crude oil prices, which had spiked immediately after the Israel-Hamas conflict, have cooled down but are still elevated.
Crude oil prices jumped 5 percent after Hamas launched a surprise attack on Israel on October 7 killing more than 1,000 people mostly non-combatant civilians including women and children.
Meanwhile, the Israel-Hamas conflict will test the resilience of the Indian policymakers amid uncertain geopolitical and economic factors such as inflation, US-China trade war etc.
Prior to the tensions in West Asia, the crude oil prices were already elevated due to supply squeeze in the global market.
Largest oil producers including Saudi Arabia and Russia announced additional supply cuts starting July, which stoked the oil prices.
While, Saudi cut oil production by a million barrels per day, Russia snipped exports by 300,000 barrels per day starting July till the end of 2023 calendar.
Although Israel or Palestine are not major oil producers, crude prices are sensitive to war as Hamas is openly backed by Iran, although Iran has denied any role in the terrorist attack carried out by Hamas militants.
Iran, which is a major oil producer, continues to face US sanctions over its alleged nuclear and armament programmes.
However, exports from Iran increased in recent years. Now, Iran’s possible involvement in the war in an already supply-strained market could stoke further oil price rise.
Meanwhile, India is monitoring the conflict between Israel and Hamas closely for taking actions based on the developing oil market matrix.
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India sources a major amount of crude oil from West Asia, especially Saudi Arabia and Iraq.