The price of oil has experienced a strong rebound in recent hours due to the escalation of tensions between Israel and Iran.
According to CNN reports, Iran has started a bombing attack against Israel, which has caused all the alarms to go off in the region and in global markets.
Geopolitical impact on the price of crude oil
Adverse geopolitical phenomena, such as armed conflicts, tend to drive up the price of oil. This trend is due to several factors:
- The arms industry requires large quantities of oil for the production and operation of military equipment. An armed conflict increases the demand for these products, which in turn increases the need for oil.
- Also, tensions in the Middle East, a key oil-producing region, are raising concerns about possible disruptions to global crude oil supplies.
- In addition, investors and speculators often bet on rising oil prices in times of conflict, which helps boost prices.
Let’s look at it more exhaustively below.
Oil versus other assets
In situations of geopolitical crisis, oil tends to stand out as an investment asset compared to other options:
- Dollar strength: Although the US dollar tends to strengthen as a safe haven in times of uncertainty, oil has demonstrated its ability to maintain and even increase its value despite the appreciation of the US currency.
- Fall of other assets: While stocks, cryptocurrencies and other conventional assets often suffer declines due to investor fear, oil benefits from its status as a strategic commodity.
- Less attractiveness of alternative investments: Volatility in the stock and Cryptocurrency markets makes many investors seek refuge in more stable assets or those with the potential for appreciation in times of crisis, such as oil: let’s face it, sadly, even if it’s because of a war.
On the oil chart (WTI) we see how its price has turned sharply upwards today: as well as its daily maximum and its price at the time of writing this report. Source: Investing.com
So obviously the recent spike in oil prices is due to a combination of factors:
- Iran attack on Israel: Reports of the Iranian bombing have raised fears of a broader regional war, causing an immediate spike in crude oil prices.
- Previous tensions: The conflict between Israel and Hamas had already generated concern in the oil markets, and Iran’s direct intervention has exacerbated this situation.
- Production at risk: The possibility that the conflict will affect oil production or transportation in the region has increased upward pressure on prices.
Short and medium term perspectives
The future of the oil price will largely depend on how the situation in the Middle East evolves:
- Conflict escalation: If hostilities intensify or spread to other countries in the region, oil prices are likely to continue their upward trend.
- International intervention: The response of the international community and possible diplomatic efforts to de-escalate the situation could moderate the increase in prices.
- Impact on production: Any significant disruption to oil production or transportation in the region could lead to even steeper increases in global crude oil prices.
Global economic consequences
The increase in the price of oil has significant implications for the global economy:
- Inflationary pressures: More expensive oil can translate into higher energy and transportation costs, which could drive inflation in many countries.
- Impact on economic recovery: Rising energy prices could slow down the global economic recovery, especially in net oil-importing countries.
- Benefits for producing countries: Oil-exporting countries could see their income increase, although this could be offset by geopolitical instability in the region.
Conclusion
The escalation of war between Israel and Iran has caused a significant rise in the price of oil, reflecting the sensitivity of this commodity to geopolitical events.
As long as the situation in the Middle East remains volatile, oil markets are likely to continue to experience significant fluctuations, with potential repercussions for the global economy and international financial markets.
Do you want to always be updated in the world of cryptocurrencies? Subscribe now to the CriptoTendencia WhatsApp channel! Here you will instantly receive the most relevant information about Bitcoin, Altcoins, DeFi, NFTs, Blockchain and the Metaverse.
Related
Crypto Keynote USA
For the Latest Crypto News, Follow ©KeynoteUSA on Twitter Or Google News.
