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Geopolitical Tensions in the MiddleEast: Implications for Oil Markets


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In a world where oil plays a pivotal role in global economies, any geopolitical turmoil can send shockwaves through oil markets.

The recent outbreak of hostilities between the Islamist group Hamas and Israel is no exception. While Israel isn’t a major energy producer, the conflict’s potential impact on oil markets is a significant concern, akin to the concerns raised during Russia’s invasion of Ukraine last year. In this article, we will explore the potential ramifications of the Hamas-Israel conflict on oil markets.


Oil Market Impact

While the Hamas-Israel conflict has not yet disrupted oil and gas flows, industry experts and analysts are closely monitoring the situation for several key reasons.


U.S. Sanctions on Iran

The United States might consider tightening or intensifying sanctions on Iran if it is implicated in Hamas’ attacks on Israel. Such a move would strain an already undersupplied oil market. In response, Iran could retaliate by disrupting energy flows from neighboring OPEC countries through the crucial Strait of Hormuz.


Saudi Arabia-Israel Relations

Another aspect of this conflict is the potential derailment of a deal being brokered by the United States to normalize relations between Saudi Arabia and Israel. This normalization could lead to an increase in Saudi oil production, which would be a welcome relief for oil markets.


Oil Price Fluctuations

Since the conflict began, Brent crude oil prices have surged by over $5, reaching above $90 a barrel. However, these price jumps differ from the 1973 oil crisis when Saudi Arabia spearheaded an embargo, leading to soaring oil prices. At present, Saudi Arabia and Russia have already announced voluntary supply cuts until the end of 2023, which had previously pushed oil prices to 10-month highs.


Experts’ Opinions

While the conflict undoubtedly impacts oil markets, experts differ in their assessments. David Goldwyn, a former special envoy for international energy affairs at the U.S. State Department, believes that fundamentals will continue to be the primary driver of oil prices. Meanwhile, Rob Thummel, a senior portfolio manager at Tortoise Capital, argues that substantial oil price increases are unlikely without disruptions in the Strait of Hormuz, a crucial global oil artery.


Iranian Crude Exports

Despite U.S. sanctions, Iranian crude exports have been steadily growing, partially offsetting the voluntary cuts by Saudi Arabia and Russia. As Iran backs Hamas, any tighter U.S. sanctions on Tehran would threaten crude supplies and potentially lead to increased energy prices globally and domestically, which President Joe Biden aims to avoid.


U.S. Foreign Policy

Some analysts doubt that the United States will risk supply disruptions by imposing harsh sanctions on Iran. Macquarie analysts draw parallels with the Russia-Ukraine conflict, where Russian oil flows were not targeted, suggesting that Iranian oil exports might remain largely unaffected.


Saudi Arabia’s Changing Priorities

Saudi Arabia, a key player in the global oil market, has recently put plans to normalize ties with Israel on hold due to the ongoing conflict. The United States has been working to mediate a reconciliation between the two nations, but these talks might now be suspended, affecting an important avenue of U.S.-Saudi cooperation.




The geopolitical tensions in the Middle East resulting from the Hamas-Israel conflict have cast a shadow of uncertainty over oil markets. While the immediate impact has been a surge in oil prices, the long-term consequences remain uncertain. The interplay of U.S. sanctions, Iranian crude exports, and the potential Saudi-Israeli relations reset all contribute to the complex web of factors influencing oil markets. As the world watches the situation unfold, the oil market remains sensitive to any escalation or resolution of the conflict in the Middle East.

Zain Saleem
Zain Saleem
Zain Saleem is an Islamabad-based Senior Journalist

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