Geopolitical Tensions Cause Brief Spike in Oil Prices
Escalating conflicts in the Middle East triggered a spike in oil prices during early Asian market hours on Monday. News of explosions near Isfahan in Iran, suspected to be part of ongoing tensions with Israel, boosted Brent crude over 3% at the open. However, gains proved fleeting as more details suggested a localized incident.
Israel has not confirmed responsibility for the attack but also declined to deny it. With both nations exchanging airstrikes in recent weeks, the risk of a wider conflict disrupting oil shipments remains a concern for traders. The Strait of Hormuz, through which a fifth of global oil flows, could become a flashpoint.
Volatility Expected To Continue
By the late European morning session, cooler heads appeared to be prevailing as oil prices retreated. Absence of major damage or threats of retaliation eased immediate supply anxiety. Still, political instability across the region ensures oil prices will track developments closely. Any damage or blockades could see costs spike anew on this razor thin buffer between supply and demand.
Analysts warn geopolitics means oil prices will remain volatile. While outages seem unlikely for now, traders brace for further sharp swings on each new headline. Economic worries from inflation and recession risks also hover in the background. The dual pressures of conflict and demand uncertainty leave oil prices at the mercy of breaking news.
