Oil is becoming more expensive. Europe is paying for the Hamas attack

The war in Israel could disrupt oil and gas prices, the Polish Economic Institute says.

The war in Israel threatens the process of normalization of relations between Saudi Arabia and Israel, which will delay Saudi Arabia’s decision to withdraw from the extensive cuts in oil production and, together with the factor of the return of the US to tighten sanctions on Iran, which likely participated in the Hamas attacks, will lead to a reduction in oil market supply and a rise in commodity prices, the Polish Economic Institute (PIE) estimates. In addition, Israel has closed its gas field as a result of the war, endangering gas supplies from Egypt to Europe.

“The rising price of crude oil also resulted in an increase in gas prices in Europe by approximately 30% to almost 49 euros/MWh. The main reason for the increases was primarily a leak in the gas pipeline connecting Finland and Estonia, likely caused by a deliberate act of sabotage, and then investor concerns about limiting the supply of raw materials from the Middle East. For security reasons, Israel closed the gas field that supplied Egypt. Exports in this direction fell by 20 percent, which also threatened the gas supply from Egypt to Europe. to land. In the first half of 2022, Israel increased gas production by 22% and exports by 35%, becoming a major gas supplier to Europe. However, the current situation may undermine long-term plans for gas cooperation between the specified regions. ‘ we read in the PIE Economic Weekblad.

Will the destabilization of the region shake the market?

PIE reported that investors are currently mainly concerned about the destabilization of most of the Middle East, a key region for the global supply of raw materials.

“Over the past year, due to weaker enforcement of US sanctions, Iran has gradually increased production by about 0.5 million to 3 million barrels per day, i.e. about 3 percent of global consumption. This lowered the price in global markets and eliminated problems with meeting expectations. According to reports from The Wall Street Journal, Iran may have been involved in the Hamas attack, which would mean a return to stricter US sanctions and a reduction in supply to the oil market,” we read further.

Following Hamas’ surprise attack on Israel, the price of Brent crude oil rose by about 5% early this week to more than $87 per barrel, PIE reported.

‘We are not currently dealing with a repeat of the 1973 oil crisis because the Arab countries are not a direct participant in the war and the oil market situation is more stable. Moreover, the Israeli-Palestinian conflicts have had no consequences this century. significant impact on crude oil prices. Israel and neighboring countries are not major producers of the commodity, therefore the short-term risk to crude oil supplies is limited,” we also read.

Source: Do Rzeczy

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