The situation in the Middle East has a direct impact on the rise in oil prices

One of the main economic consequences of the conflict in the Middle East concerns the price of oil. On Thursday, the price of a barrel jumped.

The geopolitical situation in the Middle East almost always has repercussions on the price of a barrel and therefore, ultimately, on the price of fuel at the pump. The tensions of recent days have caused the price of a barrel of Brent to rise on the markets. It is trading on Friday, October 4, around 77 dollars, compared to 70 a month ago. The fear is obviously military escalation in the region, and in particular an Israeli response against Iran which would risk damaging Iranian oil infrastructure.

Joe Biden’s statements on Thursday caused concern. The President of the United States said he was in discussions with Israel about possible strikes in Iran, suggesting that an attack was possible, even imminent. Iran is an important player in the market, even if it only accounts for 4% of world oil production, it still delivers four million barrels per day, including two million for export. But above all, Iran is the third largest oil reserve in the world. If there is an attack, Iran’s oil supply will decline and these reserves will be at risk. Markets also anticipate a return of American sanctions on Iranian oil exports, which would also increase prices.

Markets are also watching what happens in the Red Sea. In this case, the issue is not so much the production of oil, but its delivery. If the attacks by the Houthis, who are close to the Iranians, intensify, the price of a barrel will surely rise. 20% of the world’s oil passes through the Strait of Hormuz in the south of Iran. If the passage is blocked, other routes will have to be taken, which will increase costs.

The situation therefore remains very unstable and uncertain, even if for the moment, the markets are also looking at other elements. On the oil supply side, they are banking on Libya increasing its volumes, which can compensate for Iranian production losses. On the demand side, this tends to slow down, in particular because of weak European growth, but above all the sluggishness of the Chinese economy, which buys less oil. So, all in all, for now, the market seems to be balancing. But it’s very feverish.