The missile strike on Israel by Iran last weekend was expected to have a major influence on oil prices across the world. But the tensions are seemingly easing now, with crude oil prices dropping, which brings relief to the global oil market. Oil prices slumped towards the mark of $89 per barrel.
Let’s go ahead and discuss these things further in this blog.
By How Much Did Oil Prices Drop?
On Monday, the oil prices for the global markets saw a downward shift that was followed by a message of easing escalations between Iran and Israel. The price of oil per barrel dropped by $.81, which brought the price down by almost 0.9% to $89.6 per barrel.
Oil prices surged on Friday as Iran announced potential strikes on Israeli territory. This made the global oil market unstable, as brokers were worried about the unobstructed flow of oil through the Strait of Hormuz. The Strait is the place through which more than 80% of the world’s oil supply takes place.
As Iran and its proxies control most of the global oil trade routes by sea, the market was anticipating wider results from the escalation. The prices for oil per barrel reached the highest ever since October last year.
Also read: Iran Declares War On Israel: World War 3 Incoming?
Claims On Oil Price Recovery: A Western Propaganda?
The web is flooding with updates that are excessively optimistic about reducing oil prices. The claims of those pro-western outlets miss out on a larger perspective of the oil price game. The silence before a storm cannot be ignored, as historically, prices of commodities such as oil, ores, and grains have significantly reduced and increased during wars.
There is no actual proof that this low oil price per barrel will continue to sustain itself for long. There are many sides to the conflict between Iran and Israel, so future implications must be taken into account. Iran is a major power in the Gulf region, and they can potentially block the Strait of Hormuz, which will bring the oil trade to a standstill.
Earlier, the experts also predicted that oil prices could increase and cross the $100 mark. If further escalations happen, then this figure can be much higher than anticipated. The oil market must embrace any upcoming situation.
The excessively optimistic claims about oil prices having the possibility of dropping below $80 per barrel can be ignored. The outlets are mentioning it as “US economic data,” which itself suggests the fact that such data can easily be biased due to the involvement of state agencies.
The outpour of statements from persons heading some banks and financial firms also comes at a time when it seems that they could be benefiting from US-based trade. The ongoing tension is related to oil prices, but exaggerations of other aspects not related to oil should be kept aside.
Here’s why oil prices are less likely to skyrocket:
Between 1973 and 1974, oil prices across the world skyrocketed after the US decided to support Israel in the Arab-Israeli war. The prices of oil per barrel shot up by 4 times; this happened as the major oil suppliers for the global markets were the Arab countries.
As all of the Arab countries that exported petroleum halted their exports, oil prices shot up. There was a monopoly of the Arab countries in the oil trade during that time.
Will this happen again? Almost no, as most Arab countries like Saudi Arabia, Iraq, the UAE, Qatar, Jordan, etc. now have closer trade ties with the US. Such larger escalations could only take place when an opposing nation like Israel directly attacks the soil of those partnering countries that support the US.
This event is highly unlikely to happen, but escalations can take place at any moment. Hence, oil buyers should brace for any rapid changes in the market.
The last war that heavily increased oil prices across the world was the Ukraine-Russia war. The prices for oil peaked around $130 per barrel when the initial offensive on Ukraine was started by Russia in February, 2022. Such an event is not going to happen soon, so for now, oil prices will stay around the mark of $90 per barrel.
To Summarise
The global oil market was anticipating a wider effect as a result of the ongoing tensions between Israel and Iran. But the saga of attacks by Iran has come to a standstill now. This has brought oil prices on the rise again, and they are hovering around the mark of $90 per barrel.
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FAQs
How much did oil prices drop?
Oil prices dropped by $0.81 per barrel, decreasing by almost 0.9% to $89.6 per barrel.
Why are some outlets overly optimistic about oil price reductions?
Some outlets may exaggerate claims about oil prices dropping below $80 per barrel, which may be biased based on “US economic data.”.
Are there historical oil price increases due to wars?
Yes, during events like the Arab-Israeli war in 1973–1974 and the Ukraine–Russia conflict in 2022, oil prices soared significantly.
Could oil prices rise again due to escalating tensions?
Although significant price increases are unlikely, the market could shift quickly, so oil consumers should be ready for any changes.
What is the short-term forecast for oil prices?
For the time being, oil prices are predicted to stay around $90 per barrel as tensions are expected to decrease and no major outbreaks are anticipated to occur soon.
