The ongoing conflict in Israel and escalating tensions in the Middle East pose significant risks to the global oil market, as reported by the International Energy Agency (IEA). In its latest monthly report, the Paris-based organization highlighted concerns surrounding the sharp increase in geopolitical tensions in the region, which accounts for a third of sea-borne oil trade.
Although there has been no immediate impact on physical supply, the markets remain on high alert as the crisis unfolds, cautioned the IEA. Brent crude prices surged above $90 a barrel earlier this week following an unexpected attack by Hamas on Israel over the weekend. While neither Israel nor the Palestinian territories play a significant role in oil production, analysts are apprehensive about potential ripple effects that could affect major oil producers in the region, such as Iran. Such effects may trigger a decline in supply, further exacerbating market concerns.
Moreover, this risk is compounded by the Organization of the Petroleum Exporting Countries (OPEC) tightening their supply. With oil markets already tightly balanced, as previously predicted by the IEA, the international community is closely monitoring any threats to the region’s oil flows. The IEA now predicts a growth in oil demand of 2.3 million barrels per day this year, a slight increase of 100,000 barrels per day compared to last month’s report. If this projection holds true, it would result in a total daily demand of 101.9 million barrels, setting a new record.
The IEA attributes this elevated demand to strong growth in China. As tensions persist and geopolitical uncertainties persist in the Middle East, the global oil market faces an uncertain future.