oil prices: Iran to attack Israel: How it may affect your petrol bill?

Geopolitical tensions in the Middle East have led to a 1% rise in oil prices on Friday, driven by concerns over potential supply disruptions. Brent crude settled at $90.45 a barrel, while U.S. West Texas Intermediate crude rose to $85.66, despite posting a weekly loss due to a bearish world oil demand growth forecast from the International Energy Agency (IEA) and worries about slower U.S. interest rate cuts.

The recent tensions stem from a suspected Israeli warplane attack on Iran’s embassy in Damascus, raising fears of retaliation from Iran. “The market’s main focus is on whether Iran will retaliate against Israel,” said Andrew Lipow, president of Lipow Oil Associates, highlighting the fear of supply disruption associated with the events in the Middle East supporting prices in Reuters report.

While the U.S. expects an attack by Iran against Israel, Iranian sources have indicated a response aimed at avoiding major escalation. However, supply chain issues remain a concern, with Iran maintaining its threat to shut the Suez Canal, according to Tim Snyder, an economist at Matador Economics.

READ MORE: Why is Israel bracing for an imminent Iranian attack?

The conflict’s impact on global oil markets is significant, as any risk of supply disruptions could lead to a price hike. The ongoing war in Gaza, part of the wider Israel-Hamas conflict, has already had some effect on oil prices. Despite the conflict’s intensity, Brent crude prices have remained stable at around $80 per barrel, with analysts noting little disruption in petroleum prices so far.

However, the possibility of Iran’s attack on Israel has added further pressure, with crude oil prices nearing six-month highs. This comes as the U.S. Federal Reserve has cut rates, and OPEC has extended voluntary cuts of 2.2 million barrels per day to maintain market stability. Analysts predict that if Iran’s attack results in a wider war, prices could rise above $100 per barrel.Impact on Indian oil prices
India, as one of the largest oil consumers and importers, is particularly vulnerable to such disruptions. While the initial impact of the conflict on India’s trade with Israel was minimal, an escalation could jeopardize India’s oil supply, as it relies heavily on imports from the Middle East. The Indian government has strategically boosted crude oil imports from Russia, accounting for over 35% of crude imports in 2023, to mitigate the impact of the Russia-Ukraine war on oil supplies.

The escalating conflict between Iran and Israel has raised geopolitical tensions and has the potential to disrupt global oil markets. The situation is being closely monitored by countries around the world, given the implications for regional stability and energy security.

(With inputs from Reuters)