The reverberations of the war between Israel and the Hamas terrorist organization are being felt not only in the conflict-ridden region but also across the global energy economy. In a newly-published report, Bank Leumi’s Chief Economist Dr. Gil Michael Bufman elaborated on the situation’s wide-reaching ripple effects.
In a proactive move, the Israeli Tamar reservoir halted the flow of natural gas, which has led to the suspension of gas exports to Egypt via the East Mediterranean Gas (EMG) pipeline. This sudden disruption is expected to have a significant impact on Egypt’s ability to export liquefied natural gas to Europe and various other nations. Less gas available means higher prices, and this could potentially end up impacting the wider global gas market.
The situation may also affect gas-exporting countries like Qatar, which is a major player in the global gas market. If things worsen, gas prices around the world could keep climbing.
Where does the US fit into all this?
The conflict in the Middle East has already cast a shadow over energy prices worldwide, but there are more ominous clouds on the horizon. The potential expansion of the conflict into other arenas, drawing in additional regional players, poses a genuine risk to energy prices.
Oil prices are expected to rise following Isralie-Palestinian ongoing conflict
A key player in the complex web of Middle East geopolitics is Iran, which holds significant influence in the region. If the United States decides to take action against Iran, whether through legal means or innovative “sanctions-bypassing” methods, this could diminish Iran’s capacity to export oil. Such an outcome would undoubtedly have a pronounced impact on global oil supply and, consequently, oil prices.
Another peril to watch is the delicate balance of relations between the United States and Saudi Arabia, which has been historically intertwined with progress toward peace agreements in the region, particularly concerning Israel. If these peace efforts stall or deteriorate, it could lead to tensions between the US and Saudi Arabia. In response, Saudi Arabia may opt to curtail oil production, further straining global supply.
The geopolitical situation is further complicated by the potential for regional destabilization, which includes concerns about the free passage of oil tankers through the strategically vital Hormuz Strait. Any disruptions in the flow of oil through this critical waterway could have cascading effects on global oil markets and supply.
In simple terms, the outlook for oil prices in 2023 isn’t great. Experts predict that a barrel of Brent crude oil could cost around $90 to $95 later this year. As the situation unfolds, the world watches closely, hoping for a resolution that can bring stability and predictability to these volatile markets.