Crude oil prices have climbed and settled in the lower $90 per barrel since the Israeli-Palestinian conflict flared up nearly three weeks ago.
However, these price movements are driven more by speculative assessment of geopolitical temperatures fuelled by the ongoing conflict than by global oil supply and demand fundamentals.
The main oil supply chains remain mostly intact, at least for the time being. But this could change suddenly if the crisis escalates into a wider regional conflict.
Except for Iran and its close allies (Iraq, Syria, Lebanon, and Yemen) which are likely to advocate use of force against Israel, the other Middle Eastern countries are more inclined to choose diplomatic engagements. Most of the Arab world is too preoccupied with balancing their budgets, as they target economic advancement in the fast evolving geopolitical and geoeconomic landscapes.
Further, some of the Arab nations have either signed the Abraham Accords with Israel or are planning to do so. The presence of USA warships on the Mediterranean Sea is an added assurance that large-scale regional flare-up could be avoided, a prospect that can hold back oil price increases.
Israeli-Palestinian conflicts have always been emotive topics, mostly clothed in religious and racial shades that are anchored on sensitive issues of hereditary entitlement and the very existence of a people — both Israelis and Palestinians.
This is why Israeli and Palestinian debates are mostly avoided in social discussions. Unless and until discrepancies between Israeli and Palestinian interests are permanently resolved, conflicts will routinely arise.
Predictably, the Western nations are supporting Israel, while countries aligned to the newly evolving Eastern bloc are sympathetic with Palestinians. Muslim nations and formerly colonised Global South also tend to side with Palestinians.
This explains why voting in the UN on any subject touching on Palestinian-Israeli relations tends to be deadlocked or vetoed.
Historically, USA guaranteed Israel creation and statehood in 1948, and this makes it imperative for America to implement this mandate on any conflict that threatens Israel. This makes Israeli issues cardinal to USA party politics, especially during election periods.
Back to oil markets. Smarting from adverse economic and energy impacts of the Russia-Ukraine war, no nation wants to experiment with a new geopolitical crisis.
This is why I believe oil prices climbing to $100 will be discretely avoided by all parties through diplomacy and restraint. However, the major variable is how Iran conducts itself in its support of Palestinians against Israelis.
