Hamas’ attack on Israel is already being felt in the energy market. Operators reacted immediately, in an already very tense context for oil and gas prices on the international scene.
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For the moment, it is mainly the gas market which is suffering. On the Rotterdam square, the gas energy exchange of sorts, prices jumped by 10% on Monday, October 9, to reach 42 euros per Mwh, deliveries are scheduled for next month. The explanation is simple: Israel has large natural gas resources, extracts this gas and sends it to Egypt which transforms it into a liquefied product before shipping it to Europe. However, exports of processed gas from Egypt to the Old Continent have tripled in 2022. We are dependent on it on this side of the Mediterranean and if the machine stops, there will be a big problem.
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The price of a barrel of Brent, the benchmark in the North Sea, increased on Monday by 4%, with a barrel settling at around 88 dollars. The same goes for WTI, the benchmark in the United States. The surge is less significant than for gas but it must be monitored very closely because several factors come into play. This violent crisis in Israel comes at a time when the market is already destabilized, in a context of very high inflation.
Reaction of producing countries
In recent weeks, OPEC+ member countries had decided to leave their production unchanged and prices had fallen slightly. But analysts say the Hamas offensive could complicate the ongoing normalization of relations between Saudi Arabia and Israel. The economic impact is coupled with strong tensions, which does not bode well for price developments. Who says tensions, says inevitable increase in prices.
Added to this is Iran, some of which denounce the covert intervention to help Hamas. If international sanctions are taken against Tehran or in the Strait of Hormuz, a surge in crude oil prices is guaranteed. Some 17 million barrels pass through this strait of the Persian Gulf controlled by Iran every day, that’s one in six barrels consumed in the world. For reference, the tightening of international sanctions against Iran and Syria between 2011 and 2014 caused the barrel to soar to around $100.