When the Middle East sneezes, the barrel catches a cold. As many analysts feared, Monday, the first market day after the outbreak of the war between Israel and Palestine, saw a rebound in oil.
Prices in the US and Europe have recorded increases between 3.9% (Brent) and 4.2% (Texas, US). The memory of the Yom Kippur crisis of 1973, when prices quadrupled, was present among many operators, although finally yesterday there was no increase in prices.
“At least from a commodities perspective, geopolitics tends to be an element of noise rather than a lasting and impactful fundamental force,” Norbert Rücker, chief economist at Julius Baer, wrote in a note yesterday.
Javier Blas, essayist and Bloomberg columnist, doubted that we are headed for a repeat of the oil shock of fifty years ago. Unlike then, at the moment there are no other Arab countries involved against Israel (neither Egypt, nor Syria, nor Jordan). Likewise, the world today is moving towards electrification and energy consumption from fossil fuels is less intensive than in the 1970s.
Much of what happens will also depend on what the OPEC cartel decides. Unlike 1973, it has the ability to turn on the tap. Another thing is that, after announcing several production cuts throughout this year, it is now changing direction and deciding to open it.
Just on Monday, the World Oil Market Outlook 2023 was presented in Vienna. In the report, the cartel predicts that global oil consumption will continue to increase at least until 2045. This would raise fears of rising prices.
However, this forecast contrasts with that of the International Energy Agency (IEA), which instead sees a possible peak and definitive decline in global demand for fossil fuels before 2030. So there is still a lot of uncertainty.
Things could get worse if the conflict spread to Iran, whose oil production this year has increased significantly (more than 700,000 barrels per day). Again, it is not clear that this will occur.
Until now Tehran has paradoxically benefited from the war in Ukraine, because it has carved out a niche for itself in the oil market after the West's veto of Russia. If the United States decided to impose economic sanctions on the Iranian regime, it could indirectly benefit Russia (and its oil), something Washington does not want.
As for the rest of the markets, the stock markets have maintained relative stability. The Ibex closed on Monday with a decline of 0.9%, while Wall Street in mid-afternoon was in negative territory by a few tenths. The main fear is that an increase in oil prices could have an impact on inflation and force central banks to maintain the current upward cycle of monetary policy, with the risk of leading economies into a recession.
Now, in a context in which oil prices have already risen nearly 30% in the last quarter, it will be necessary to see if demand can remain sustained in the event that economic growth begins to fall.
