The recent attack on Israel by Palestinian terrorist organisation Hamas has sparked concerns about supply chain disruptions and a spike in oil prices. As the situation continues to unfold, what can we potentially expect over the coming weeks and months?
Following last weekend’s unexpected attack by Hamas, which saw Israel launch retaliatory air strikes on Gaza, the price of crude oil jumped quickly with experts warning of a ‘knee-jerk surge’.
Currently, the Brent crude oil price is sitting at about $US88 a barrel, which is around 4% more than it was before the conflict began, according to updates from the ABC.
The publication reports that current forecasts suggest oil prices will “bounce around between $US80 and $US100 a barrel in the coming months”.
Despite neither Israel nor Palestine being major oil players, the conflict is within an important region for oil production and exporting, with experts telling CNBC that it has the potential to “conflagrate further”.
Middle East managing director of energy consultancy Facts Global Energy, Iman Nasseri told CNBC, “The impact on the oil price will be limited unless we see the ‘war’ between the two sides expand quickly to a regional war where the US and Iran and other supporters of the parties get directly involved”.
Following the onset of the attacks, US oil giant Chevron suspended production at its Tamar natural gas field under Israeli orders.
However, at the time, Israeli’s energy ministry said the country’s energy needs could be met with fuel from other sources, adding that Israel’s largest offshore gas field, Leviathan, was operating as normal.
Closer to home, Vivek Dhar, mining and energy economist from the Commonwealth Bank, told The Business, “If we start seeing the United States point the finger at Iran, we could see Iran’s oil exports start falling.”
He added that Iran’s oil exports could fall by 500,000 to 1 million barrels a day if sanctioned by the US, which is equivalent to 0.5 to 1 per cent of global supply.
This, he predicts, could exacerbate existing supply shortages caused by production cuts from the world’s biggest oil producers, such as Russia and Saudi Arabia.
Professor John Quiggin, senior fellow in economics at the University of Queensland, warned of the consequences of oil supply disruptions, telling news.com.au “I wouldn’t be surprised if we see petrol prices going up fast”.
There are certainly mounting concerns surrounding exports due to the reduction of air traffic — with FedEx Express and UPS joining a long list of airlines that have reduced or stopped international flights into Israel — while the shipping and maritime industry is also on edge.
Christian Roeloffs, co-founder and CEO of Container xChange told Supply & Demand Chain Executive that “any expansion of the hostilities beyond the country’s borders could introduce risks to two vital shipping choke points”.
He explained, “The Suez Canal, a critical waterway for various commercial vessels, including container ships, may face disruptions. Similarly, the Strait of Hormuz, a backbone for oil and gas shipping, could be affected. However, the extent of these effects will largely depend on the conflict’s expansion and duration”.
In conclusion, experts agree that it’s a ‘watch and wait situation’ as to how commodities and supply chains will be affected long term, due to the possibility of involvement from other countries which could escalate tensions and lead to greater disruptions.