Middle East Tensions Put Energy Markets on Edge.
Over the weekend, Iran launched missile and drone strikes on Israeli targets in response to an earlier Israel attack in Syria. Oil prices reacted cautiously to the latest escalation brewing between regional powers Iran and Israel.
After touching a high of $92 last week as tensions mounted, benchmark Brent crude fell back to around $89 on Monday morning. However, uncertainty persists in the jittery energy market as the situation develops. Analysts are watching both sides closely for any further response that could impact crucial supply routes.
The Strait of Hormuz, a strategic chokepoint for around 20% of globally traded oil, has traders on tenterhooks. Major exporters like Saudi Arabia and the UAE rely on this strategic waterway to ship their crude, and any problems here could roil prices.
Underlying all this is the threat of an uncontrolled conflict enveloping the broader Middle East. Gold prices rose near record levels, a tell-tale sign of risk aversion among investors growing uneasy at the prospect. Share markets also opened the week cautiously.
Energy experts say much depends on whether tensions escalate dramatically. One provocative move by either side could upend the best-laid plans of central banks already battling high inflation rates.
For now, the oil market is playing a careful waiting game. But the world is watching developments closely, aware of how quickly the situation may spin out of control.
