Can crude oil prices rise over the $100 per barrel level during an Israel-Hamas conflict? Experts comment

 Can crude oil prices rise over the $100 per barrel level during an Israel-Hamas conflict? Experts comment

On Monday, there was a significant increase in the price of crude oil as fears about supply increased as a result of the continuous military confrontations between Israel and the Palestinian Islamist organization Hamas. In Monday's trading, Brent Crude prices increased by nearly $3 per barrel, closing close to the $87 per barrel level.

Following a proposal by the oil cartel Opec to maintain production curbs at its meeting on October 5, crude oil prices last week declined by roughly 9% from the high point of the year. Oil prices may stay high for some time as experts worry that geopolitical tensions in West Asia might worsen.

They do not believe that crude oil prices, despite the danger posed by the Israel-Palestine conflict, could increase dramatically and maintain high levels. Crude oil prices may rise somewhat if the battle lasts longer, but it's doubtful that they would rise over $100 per barrel.

As Mint has reported, hedge firms with sizable short holdings may cover their short bets to support an oil rebound. The light sweet crude grade West Texas Intermediate (WTI), in which ICE facilitates futures trading, has net short positions of 27.38 million barrels as of the third week of October. According to the US derivatives regulator Commodity Futures Trading Commission, actual consumers and hedgers were net short by 26.6 million barrels while "others" were long by 72.6 million barrels.

"Opec nations are mindful of not growing the price of oil beyond 10–12% as they have a relationship in practice with the US of ensuring that oil prices are not increased beyond specified levels," said Deven Choksey, managing director of KR Choksey Shares & Securities. Therefore, in the short run, prices might increase by 10–12% as a result of the knee-jerk response to this assault.

The problem is that the oil dynamics will alter if the conflict lasts for a long time, like say, a week or more. After crossing the $90 threshold, Brent started to decline. The 90 threshold may now be used to indicate when the global economy is in jeopardy. India may be impacted if the price rises as a result of more supply interruptions, according to Bank of Baroda Chief Economist Madan Sabnavis.

Shrey Jain, the founder and CEO of SAS Online, anticipated a steep 10–15% increase in oil prices in the immediate wake of this incident. These elevated prices, however, are very unlikely to remain over the long term, signaling a short-term volatility.

However, Jain emphasized that if the war between Israel and Palestine intensifies, spilling over into the broader Middle East and gaining attention for Iran, a key oil producer and sponsor of Hamas, it may significantly reduce the world's appetite for risk. This may considerably damage world markets in turn.

OPEC countries are closely monitoring the situation. Jain emphasized that while they are aware of the USA, OPEC members are cautious about allowing oil prices to increase over 10–12%. According to Jain, this shared understanding aids in preventing wild swings in oil prices and preserving market stability.

Since neither Israel nor Palestine are significant oil suppliers and the war has not yet directly jeopardized any significant oil production or supply facilities, Rahul Kalantri, VP of commodities at Mehta Equities, feels that the increase in crude oil prices is likely to be brief.

However, Kalantri noted that since the conflict is geographically adjacent to important oil-producing and exporting countries, if it continues for a longer length of time, it may have an impact on crude oil prices in the short run.