Oil Prices Slide Amid Growing Concerns of Conflict in the Middle East
The diplomatic efforts to contain the conflict between Israel and the Palestinian group Hamas have intensified over the weekend, causing oil prices to plummet by more than $1. There are mounting worries about a potential wider confrontation in the oil-rich region and the impact it could have on global supplies.
Tensions Escalate, Oil Prices Fall
As of 0203 GMT, oil futures dropped 67 cents to $91.49 a barrel, after initially losing $1.02 to $91.14 a barrel earlier in the session. Similarly, U.S. West Texas Intermediate crude futures fell by 72 cents to trade at $87.36 a barrel, following a slide of $1.72 to $87.03 a barrel earlier on Monday.
Last week, the contracts experienced over a 1% increase for the second consecutive week due to concerns about potential supply disruptions if the Israel-Hamas conflict escalates further in the Middle East, which is the world’s largest oil-supplying region.
Diplomatic Efforts and Aid Convoys
Over the weekend, aid convoys from Egypt started arriving in the Gaza Strip, while Arab leaders and foreign ministers convened for a summit in Cairo. However, the summit failed to produce a joint statement.
An ANZ Research note stated, “Israel agreed to hold off its attack on Hamas following pressure from the U.S. This eased concerns that the Israel-Hamas war would spread across the Middle East and disrupt supplies.”
Despite this, Israel conducted air strikes on Gaza and targeted Lebanon with airstrikes. As a result, Asian shares drifted lower on Monday.
U.S. Suspends Sanctions on Venezuela
To alleviate the pressure on oil supplies, the U.S. has temporarily suspended sanctions on Venezuela, an OPEC member. This move comes after the Venezuelan government reached a deal with the opposition.
In the midst of the conflict, U.S. President Joe Biden has been in contact with several world leaders, including the leaders of Canada, France, Britain, Germany, and Italy. He also spoke with Israeli Prime Minister Benjamin Netanyahu and Pope Francis. Additionally, the leaders of France and the Netherlands plan to visit Israel this week to search for a solution to the ongoing conflict that began on October 7 with a Hamas attack.
As tensions continue to escalate, the global oil market remains on edge, closely monitoring the situation in the Middle East and its potential impact on oil supplies.
