When the Middle East sneezes, the barrel catches a cold. As many analysts feared, the first market day after the outbreak of war between Israel and Palestine saw a rally in oil.
Quotations in the US and Europe recorded advances between 3.9% (Brent) and 4.2% (Texas from the US). The memory of the Yom Kippur crisis of 1973, when prices quadrupled, was present among many operators, although there was ultimately no escalation in quotations yesterday.
"At least from a commodities perspective, geopolitics tends to be more of a noise element than a lasting and impactful fundamental force," Norbert Rücker, chief economist at Julius Baer, wrote in a note yesterday.
Javier Blas, essayist and columnist for Bloomberg, doubted that we are heading 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 (not Egypt, not Syria, not Jordan). Likewise, the world today is moving towards electrification and the energy consumption of fossils is less intensive than in the 1970s.
Much of what happens will also depend on what the OPEC cartel decides. Unlike the 1973, it has the ability to open the tap. Another thing is that, after announcing several production cuts throughout this year, it now turns the tables and decides to open it.
Just yesterday, 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 cause fears of an increase in prices.
However, this forecast contrasts with that of the International Energy Agency (IEA), which instead sees a possible peak and final decline in global demand for fossil fuels before 2030. So there is still a lot uncertainty
Things could get worse if the conflict were to spread to Iran, with oil production increasing significantly this year (more than 700,000 barrels per day). Again, it is not clear that this will happen.
So far, Tehran has paradoxically benefited from the war in Ukraine because it has carved out a place in the oil market after the West vetoed 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 exchanges maintained relative stability yesterday. The Ibex fell by 0.9% yesterday, while Wall Street was in negative territory by mid-afternoon by a few tenths. The main fear is that an escalation in oil prices could have an impact on inflation and force central banks to maintain the current bullish cycle of monetary policy, with the risk of leading economies into recession.
However, in a context in which oil prices have already risen by nearly 30% in the last quarter, it will be necessary to see if demand can be sustained in the event that economic growth begins to fall.
