The intensification of war conflict in the Middle Eastor after the recent attacks by Iran on Israel and by the Jewish state on the southern part of Lebanon have increased tension in the markets. Investors watch with uncertainty the rise in the price of crude oil during the last weekwhich has broken records in two years and brought back fear of a spike in inflation, casting doubt on the development of the cycle of interest declines that was expected in the coming months.
Although experts point out that the increase in prices at the beginning of October has been compensated by the strong decreases that occurred in the previous month and the price of a barrel remains far from the highs recorded this year, they also remember that the evolution of the attacks in the Middle East could aggravate the situation.
Specifically, the scenarios of a possible Israeli attack on oil facilities Iranians or a blockade by Tehran in the Strait of Hormuz (through which 20% of the oil supplied to the entire world transits) worry investors. In fact, crude oil prices have been the first to react to the latest signs of escalation of the conflict.
The takeoff of crude oil, which has reached $79 per barrel -its highest level since the end of August- began on Tuesday, after the US warned of an imminent attack by Iran against Israel. Prices moderated on Wednesday, after maintain OPEC+ its plan to reactivate production starting in December, and they rose again on Thursday due to the risk of Israel attacking Iranian oil facilities.
Fear of attack on oil facilities
The trigger was a comment by the president of the United States, Joe Biden, who said, before boarding the presidential helicopter, that that possibility is on the table. Analysts agree that the factors that will determine crude oil prices from now on are the situation in the Middle East; the evolution of demand, now stagnantand the position that OPEC+ adopts on production levels.
Ignacio Cantos, Investment Director at ATL Capital, emphasizes that, for now, this week’s increases are limited to compensating for the falls recorded in September. “We see a return to the middle zone in recent years,” he explains. “For now, oil prices remain well below its maximum recently,” recall Claudio Irigoyen and Antonio Gabriel, from Bank of America, in a recent report.
The price of Brent, Europe’s benchmark crude oil, exceeded $92 per barrel in April. However, Irigoyen and Gabriel specify that “a greater escalation could boost overall inflation and inflation expectations.” According to Thomas Hempell, of Generali Investments, “the main signal to watch in the short term is the risk of supply interruption of oil”.
“Israel’s retaliatory strikes may hit Iranian oil production centers; Yemen’s Houthis They could intensify attacks in the Red Seawhich would further disrupt global trade, and, in extreme cases, Iran could try to de facto close the Strait of Hormuz,” he explains.
In a situation like that, he adds, “rising energy prices could raise new inflationary concerns and stop the normalization of monetary policyHowever, Hempell points out that “the sluggishness of the Chinese economy and the new slowdown in global industrial production have weighed on energy prices during the summer.”
To this factor would be added, “the recent strategic turn” of Saudi Arabiawhich seems to be abandoned its goal of raising the price of crude oil up to one hundred dollars and is now betting on increasing production. According to Manuel Pinto, market analyst, It is “difficult” to predict the evolution of crude oil prices “in a scenario in which, right now, everything depends on Israel’s response” to the Iranian attack.
However, he considers that, in the long term, “the downward spiral of oil could continue up to $60 per barrel” due to the stagnation of consumption and the expected increase in production.
