The price of oil is rising strongly

Oil futures quotes rose by around 3% yesterday, on the international stock exchanges, against the backdrop of escalating tensions in the Middle East, as concerns are fueled that Iran's military attack against Israel could lead to new conflicts and, implicitly , would disrupt oil production in the region.

The futures price of a barrel of Brent oil for December delivery rose by 2.9% in the second part of yesterday, at ICE Futures Europe, reaching $75.71. At Nymex USA, the price of West Texas Intermediate (WTI) oil for November delivery rose by 3.2%, to 72.03 dollars per barrel at 10.10 local time. Yesterday's advance came after shares on the profile market gained 5% on Tuesday.

Iran is an important player on the global crude oil market, and the latest data published by the US Energy Information Administration indicates this country as the ninth largest profile producer. Thus, Iran achieved, last year, approximately 4% of the world's oil production.

However, in the current context, some analysts believe that financial markets could avoid panic, citing three key reasons: expectations about the path that the conflict in the Middle East will take, geopolitics and the increasingly fragile health of the world economy , according to an analysis by The Guardian.

"It is quite surprising when you see escalations of conflicts and nothing moves, in general. It's not what you expect from the markets," said Nuwan Goonetilleke, head of capital markets at insurer Phoenix Group. He added: "The conflict has escalated in the last 12 months. The market will continue to follow developments to see if the conflict attracts other regional powers as well."

Analysts remain confident that the recent escalation can be stopped, according to the cited source. Specialists from the consulting firm Capital Economics declare: "Given the likelihood of a military response - possibly led by the US - we doubt that Iran could, in practice, close the Strait of Hormuz for a long time."

It should be noted that major oil and gas exporters - including Saudi Arabia, Iraq, the United Arab Emirates, Kuwait and Qatar - rely heavily on the Strait of Hormuz.

According to Reuters, Torbjörn Törnqvist, chief executive of trading firm Gunvor, is "very confident" that global crude supplies will not be affected. "We have a situation around the Red Sea, Yemen, but in general the deliveries will not be interrupted," he said.

According to analysts, the panic on the financial markets can be mitigated even by the economy itself. They say demand for oil has fallen amid slowing global growth - particularly in China, the world's biggest commodity consumer, where Beijing is struggling to revive activity. European industry is also in trouble, with recent figures showing factory output fell in September at its steepest pace this year.

Demand from China has fallen to "a few hundred thousand barrels per day" from around 1.3 million per day in 2023, according to Ole Hansen, chief commodities strategist at Saxo Bank, who points out: "We believe that these conditions indicate a price of Brent crude oil stuck at 70 dollars for the foreseeable future, with a geopolitical event or a recovering China, possible factors of a positive surprise".

Oil prices have fallen from over $90 a barrel in April to around $70 today, easing inflationary pressures.

• • XTB: "The conflicts in the Middle East - reasons for concern for the economy"

The conflicts in the Middle East, which are becoming increasingly dramatic from day to day, worry investors and the capital market and expect a consistent increase in the price of oil, which could subsequently lead to an increase in inflation, it shows XTB analysts - investment company on international stock exchanges.

The escalation of the conflict in the Middle East, including the threat of closing the Strait of Hormuz, could lead to a significant increase in the price of oil, which will also cause an increase in inflation. This would compromise the central banks' plans. In fact, for several months, this was the big fear on Wall Street, XTB analysts point out.

Although tensions continue to rise in the region, oil price increases due to geopolitical risks remain surprisingly low, overshadowed by fears of an economic slowdown in China and the United States, according to the source, who added: The Organization of the Petroleum Exporting Countries (OPEC) have also influenced oil prices in recent days. In addition, short speculative oil positions are at record levels, amplifying potential price volatility should the situation worsen. Therefore, it is essential to closely monitor the developments of the stock exchanges".

The closure of the Strait of Hormuz, a strategic passage for world oil trade, remains a real threat in this context of growing tensions between Israel and Hezbollah. Although no immediate Iranian action has been observed in this regard, an escalation of the conflict, such as a massive Israeli ground invasion of Lebanon, could set off a chain reaction that would intensify geopolitical tensions and lead to a significant increase in oil prices, according to XTB.

According to XTB, Elliott wave theory suggests two scenarios for Brent oil. The first, "bullish", could surprise investors with a violent return caused by a market event, sending the price to 100 dollars/barrel. The second, "bearish", is that of a global recession that would cause prices to drop to around 50 dollars/barrel.

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