Oil prices down during the week despite increased tension in the Middle East
Oil prices down during the week despite increased tension in the Middle East
It has been an eventful week with geopolitical events in focus. It began on Saturday, April 13th, when Iran fired over 300 missiles at targets in Israel. Israel's defense systems had a success rate 99% of the missiles minimized the damage. In the following days, oil prices continued to fall despite increasing tensions. This trend persisted until Friday when Israel conducted a counterattack against Iran. This led to a slight increase in prices as reports came in, but it subsided again before WTI oil closed at $83.14, the lowest since late March, and down more than 3% over the week. Speculators and investors are in limbo, waiting to see whether the situation will resolve itself or deteriorate further.
After Iran's attack, there was fear that we could see oil prices around $100 per barrel, but this scenario did not play out. Investors seem to believe that Israel's limited counterattack gives Iran a chance to refrain from attacking again. At the same time, it appears that the barriers to starting a full-scale war are significant for both parties.
The fear related to oil prices in this conflict is largely tied to the supply side. A war could disrupt transport through the Strait of Hormuz by Iran, which is one of the world's most important passages for oil and refined products. Over 20 million barrels per day are transported through here, equivalent to about 20% of daily production. A closure of this would thus drive up oil prices, and it is reported that $130 could be a possible level. How high can oil prices go before the entire economy is affected?
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