Oil & Gas Oil prices surge as conflict intensifies in Israel By Eva Levesque October 9, 2023 Reuters/Essam Al-Sudani Workers at Majnoon oil field in Iraq. 3% increase after surprise attack on Saturday Questions over potential role of Iran Saudi normalisation talks set to be affected Oil prices rose by more than 3 percent on Monday in the wake of Hamas’s surprise attack on Israel, which threatens to destabilise the Middle East. Brent crude was trading at $87.65 a barrel, up 3.6 percent, by 17:41 GST while US West Texas Intermediate was at $86.15 a barrel, up just over 4 percent. “The market has done a knee-jerk response to increased levels of conflict in the region and that’s normal,” Bill Farren-Price, senior researcher at the Oxford Institute for Energy Studies, told AGBI. Dubai regulator halts unapproved crypto sale Late-stage funding tumbles for UAE tech startups Energy-hungry data centres present net-zero hurdle The surge in oil prices reversed last week’s downward trend, but analysts said they did not expect it to have a immediate major effect on the oil market as neither Israel nor its direct neighbours are critical to global oil supply. Traders have expressed concern that Iran and possibly the US could become embroiled as the conflict escalates. Iran provides funding and weapons to Hamas, but Tehran has denied that it was involved in Saturday’s assault. If Israel and its allies become convinced Iran did play a role, this could lead to a widening of the conflict and to a tightening of sanctions. “If the Iran link becomes more proven in the mind of Western policy-makers, that’s an issue,” said Farren-Price. “This will change the game completely.” Any retaliation on Tehran could compromise the passage of vessels through the Strait of Hormuz, which is a vital oil export route, and put the spotlight on Iranian supplies. Iran has recently increased its oil exports in defiance of sanctions, as Washington has softened its approach. “But the US could choose to stop [doing that] and that would mean that we could see Iran production and exports go down,” said Farren-Price. A protracted conflict between Israel and Hamas could also damage efforts to extend the Abraham Accords, normalising Israel’s relations with other Gulf Arab states – notably Saudi Arabia. Iran’s President Ebrahim Raisi told CNN in September that the US-sponsored talks would “see no success”. On Monday, US banking giant Goldman Sachs said the weekend’s attacks would reduce the likelihood of Israeli-Saudi normalisation and the associated boost to Saudi production, Reuters reported. Just three days earlier, Saudi officials had reportedly told the White House that they were willing to raise output next year as part of the proposed Israel deal. On supply and demand, Farren-Price said: “It’s difficult to see oil prices continuing to rise given the weak global macroeconomic environment, unless there is a shortage of supply, and we’re not seeing that at the moment.” Opec raised its world oil demand forecasts for the medium and long term in an annual outlook released on Monday. It expects demand to reach 116 million barrels a day by 2045, around 6 million bpd higher than predicted in last year’s report.