Israeli airstrikes escalate conflict with Hamas, raising concerns of oil price and inflationary pressures
In the midst of the escalating conflict between Israel and Hamas, experts are warning of potential consequences such as rising oil prices and inflationary pressure. Pierre-Olivier Gourinchas, the chief economist of the International Monetary Fund (IMF), stated that it is still too early to determine the impact on global economic growth. However, the IMF is closely monitoring the situation, particularly the rise in oil prices since the start of the conflict. Disruption in oil production or transportation in the region could potentially occur. World Bank President Ajay Banga referred to the conflict as an unnecessary global economic shock, making it more challenging for central banks to achieve soft landings in many economies. Rory Johnston, founder of Commodity Context, noted that the conflict immediately impacted oil prices, with a $3 to $4 increase in global crude prices. Although the area itself does not produce much oil, concerns remain about potential political implications and how they could impact the crude market and petroleum flow.
Since the initial shocks caused by the conflict, oil prices have started to stabilize in recent days. This stabilization has helped ease inflationary pressures and support Wall Street. U.S. crude oil dropped by 2% to $84.27 per barrel, and Brent crude, the international standard, fell by 1.4% to $86.42 per barrel. Saudi Arabia’s commitment to stabilizing oil markets has also played a role in the slight decrease in prices.
While some short-term market reactions were to be expected, the medium-term trends will largely depend on the actions of other players involved in the conflict. Observers are particularly paying attention to Iran’s potential involvement, as the country has recently increased its oil exports. Any increased involvement from Iran may result in the United States tightening sanctions, which could affect global oil supply. Additionally, the conflict could impact a potential deal between Saudi Arabia and Israel to normalize relations. If the Israeli bombardment of Gaza continues, Saudi Arabia may join a coalition of Arab states to exert pressure on Israel to end the assault, potentially derailing the deal between Saudi Arabia and Israel. The uncertainty surrounding oil prices has experts warning of inflationary pressures and rising food prices, which have already been affected by the war in Ukraine and Russia’s withdrawal from the Black Sea grain agreement.
This geopolitical crisis further complicates an already challenging global economic and political climate, which could lead to further growth and inflationary concerns. The situation continues to develop, and the global community is closely watching for potential impacts on the economy.
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