Israel is facing a sudden, barbaric attack by the Islamist group Hamas on its territory, with Prime Minister Benjamin Netanyahu declaring that the country is “at war”.
The attack occurred exactly 50 years after the Yom Kippur War, also known as the Fourth Arab-Israeli War.
This war caused the first global oil crisis with black gold prices soaring after the Arab Gulf countries embargoed exports. Today the new conflict finds the oil market already in turmoil and prices close to $85 a barrel. So should we expect a new energy crisis? What is next for the oil market?
Certainly the developments drastically reduce hopes for a US-brokered deal that would smooth Saudi Arabia’s relations with Israel and lead to lower prices. When the markets open on Monday, it is possible to see a jump in oil prices and stock markets in ‘red’.
Efforts to bring Saudi Arabia – Israel closer
According to recent reports, the Biden administration was planning significant diplomatic moves in the Middle East. The Saudis would formally recognize Israel and in return would have military aid from the US. As part of the broader deal and Riyadh’s willingness to improve its stance, Saudi oil production would rise and prices would fall.
Meanwhile, Hamas has cited Israeli police actions at Jerusalem’s Al-Aqsa Mosque as justification for its rockets fired into Israel and abduction of civilians. However, it is clear that its main goal is to derail the process of normalizing relations between Saudi Arabia and Israel.
Riyadh’s “tango” with Moscow and the Iran factor
After Russia’s invasion of Ukraine and Western sanctions, Riyadh proved to be one of the Kremlin’s most valuable “allies” as it made coordinated cuts in oil production, keeping prices high. Russia absolutely needs this to finance its war. An agreement with the US would “break” this alliance.
Analysts’ eyes are also on Iran. Some see Iranian influence behind the Hamas attacks and Tehran’s interest in undermining the diplomatic goals of its regional rival, Saudi Arabia. What everyone is waiting to see is whether Tel Aviv will publicly blame Tehran for the Hamas attacks – which would automatically mean a widening of the conflict.
A war that would extend beyond Israel’s borders would certainly trigger strong tremors in markets internationally and possibly a new energy shock.
