December 7, 2023

Oil Prices Experience an Upward Spike After Hamas Attack on Israel

  • October 25, 2023
Oil Prices Experience an Upward Spike After Hamas Attack on Israel

Asian refiners are starting to get alarmed by rising oil prices due to the intensifying geopolitical unrest in the Middle East; nevertheless, short-term supply worries are mitigated by an abundance of cargo from Russia and exporters outside the Persian Gulf.  Over the weekend, militants with Hamas attacked Israel, killing hundreds of people and capturing hostages.

At least 900 Israelis had died as of Monday, the majority of them civilians. According to ABC News, which cited Palestinian sources, Israel has killed more than 560 Palestinians in reprisal.

The violence increased the price of oil. 

Friday’s closing price of Brent Crude, the global oil standard, was less than $85 per barrel. Prices had increased to almost $88 per barrel on Monday.

“A geopolitical risk premium is typically created whenever there is a conflict in the Middle East,” according to Ben Cahill, a senior scholar at the Center for Strategic and International Studies on the Middle East tensions impacting the oil supply and demand.

The unexpected Hamas attack on Israel has heightened concerns about a protracted period of geopolitical unrest in the Middle East at a time when global oil supply has been constrained and demand—driven primarily by aviation fuel—has increased. This has reignited the discussion about oil surpassing the $100/b mark. The political and military group Hamas has previously been associated with Iran.

The most significant worries for Asia are supply uncertainty brought on by anticipated disruptions to physical flows in the wake of the assaults and a potential price increase. The global oil market would also be significantly impacted by the conclusions Washington makes about Iran, according to Kang Wu, Head of Global Oil Demand and Asia Analytics at S&P Global Commodity Insights.

Following the strike by Hamas and Israel’s military reaction, crude prices increased

“While the price increase remained relatively moderate, hovering between 2% and 4%, it is essential to recognize that this market reaction is primarily driven by sentiment, and confusion and does not address the broader issue that could potentially lead to a significant escalation of the conflict.

Although it’s not a significant rebound, Cahill noted that it’s noteworthy, considering the oil price saw a significant sell-off late last week.

Over the past several weeks, there has been a sharp decline in the price of oil; in late September, Brent Crude hit a high of $94 per barrel. That decline was accompanied by worries that the economy would contract, partly due to rising interest Despite the spike over the weekend, Tom Kloza, worldwide head of energy analysis at the Oil Price Information Service, stated that he believes oil prices will be relatively stable for the time being.

“I believe that commerce will remain in the 80s for some time to come, and in the absence of a significant impetus to move things further, Kloza said.

Following a recent drop in the price of oil before this weekend, Kloza stated that he still anticipates gasoline prices to drop in the coming weeks.

There’s still a downturn of 20 to 40 cents a gallon to catch up with,” he stated.

Cahill said that while the situation mainly relies on whether Iran was involved in the attack on Israel and, if so, how the world will react, the increase in oil prices may not last long.

In the end, probably, the price rebound will not last very long. We’ll just have to wait and see. What transpires with Iran is the crucial question.

Involvement Of Iran Impacting The Oil Supply & Demand

According to a Wall Street Journal report published on Sunday, Iran was involved in the attack planning. However, a senior Biden administration official stated Monday that the U.S. government could not verify the information.

While “Iran is broadly complicit in these attacks for having supported Hamas going back decades,” deputy national security adviser Jon Finer said on “Good Morning America” on Monday that there is presently “no evidence of direct support” for this particular incident.

Iran’s involvement in the oil industry might have a significant influence.

According to Kloza, there may be a $5–$20 per barrel “war fear premium” if Iran’s “fingerprints show up on this.”

Cahill pointed out that since May, Iranian oil shipments have increased and have served as a “buffer” to lessen the effects of Saudi Arabia’s continuous reductions in oil production.

In Cahill’s opinion, what happens next with Iranian exports is the crucial issue to follow. “Now, I think there will be a lot of speculation that U.S. sanctions enforcement on Iran will increase if there is clear evidence that Iran has materially supported Hamas,” Cahill said.

According to Brenda Shaffer, a U.S. Naval Postgraduate School professor specializing in foreign politics and international energy, Israel may target Iranian infrastructure, which would raise oil prices even more.

Shaffer states, “Israel might attack Iran’s strategic infrastructure at some point, which would also raise the price of oil globally.”


The recent surge in oil prices following the Hamas attack on Israel has sparked concerns among Asian refiners and global markets. The Middle East tensions have historically created a geopolitical risk premium in oil prices, a sentiment echoed by experts like Ben Cahill from the Center for Strategic and International Studies.

While the initial price increase remained relatively moderate, hovering between 2% and 4%, it is vital to note that it was primarily driven by sentiment and uncertainty. The situation remains fluid and doesn’t necessarily address the broader issue of potential escalation in the conflict.

The implications for Asia primarily revolve around supply disruptions and potential price increases, further compounded by ongoing concerns about global oil supply and rising demand. The role of Iran in the conflict adds another layer of complexity, with implications for the oil industry and international politics.

The oil supply and demand depends on various factors, including the extent of Iranian involvement in the attack on Israel and how the world reacts. While prices have seen fluctuations in recent weeks, experts like Tom Kloza expect relative stability for the time being.

Ultimately, the situation remains unpredictable, with questions about Iranian involvement and potential further escalations. The oil market and global stability will closely monitor developments in the Middle East and the actions taken by key players, including Israel, Iran, and the international community.

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