Israel At War. Oil, Gold, And Dollar Prices Soar
Oil prices have skyrocketed since the Hamas attack on Israel, with experts reminding that these kinds of events, while dramatic and unexpected, usually have a “short-term impact” on crude oil markets.
As Israel and the world mourn the victims of the Hamas lightning attack, oil prices continue to rise. Futures for Texas WTI crude oil for November delivery grew more than 3% on Monday, October 9, reaching $85.5 per barrel. Benchmark North Sea crude oil Brent is also following the rising trend, reaching $87 per barrel (+2.86%) in contracts for the last month of 2023. In Asia, gold as a “safe financial haven” also grew in price to $1,864 per ounce (+1%). However, Asian prices were also influenced by a number of “national” factors: the Shanghai Stock Exchange is recovering from the Golden Week celebrations, trading in Hong Kong was suspended due to a typhoon, and the markets of South Korea and Japan are closed for national holidays.
A jump in WTI and Brent crude futures partially recouped last week’s losses (Brent then depreciated by as much as 11.3%, its biggest drop since March 2023) after Hamas’s surprise attack on Israel increased the risks of geopolitical instability in the Middle East.
As for the currency markets, the dollar is strengthening against the euro (-0.33% to the dollar, the single European currency is trading at $1.0555). On Monday, the USA celebrates Columbus Day that, although a federal holiday, does not affect stock market working hours.
The war in Israel has primarily cast doubt on Washington’s hopes of restoring relations with OPEC+ leader Saudi Arabia, which would encourage the kingdom to increase oil production. On Friday, October 6, on the eve of the Hamas attack, the American Wall Street Journal wrote that “Saudi Arabia will be ready to increase oil production early next year as an integral part of an agreement, under which the kingdom would recognize the State of Israel and, in return, receive a defense agreement with the United States.”
According to the Reuters news agency, “increased production in Saudi Arabia will help alleviate supply shortages in the global oil market after months of cuts by major producers, including Russia.”
Finally, the markets are in a state of fibrillation due to the possible involvement of Iran in the Hamas attack, as cited by Washington. Tehran, a major oil producer and Hamas backer, rejected the American accusations. “Any retaliatory measures against Tehran could jeopardize the navigation of oil tankers in the Strait of Hormuz, which Iran has threatened to close,” Bloomberg writes.
The Strait of Hormuz is one of the global oil and gas market’s most important transport arteries that sees the annual passage of a third of total liquefied natural gas (LNG) exports and a quarter of oil volumes.