Warnings on Oil Speculation Amid 12-Day War
Despite Anticipated Demand, Oil Prices Remain Stable (So Far)
After penning "The Market ripples of US-Iran Tension" following the US's role in the recent Israel-Iran conflict, now labeled as the "12-Day War," I urged investors to steer clear of oil speculation.
At the time, I
- Oil prices displayed a rollercoaster ride, with initial jitters induced by the escalating conflict later giving way to relief and plummeting petroleum prices—approximately 7% descent—upon the implementation of a ceasefire.
- Contrary to fears, the world was teeming with excess oil stock, according to reports of Iran's oil production skyrocketing to a seven-year high during the conflict period, indicating minimal supply disruptions.
- The Strait of Hormuz, a vital passage for nearly a fifth of global oil consumption, was under tension due to the ongoing tussle, although its uninterrupted flow capped risk premiums on prices.
- Investors exhibited a cautious yet optimistic posture following the ceasefire, with oil prices experience a gradual uptick as markets gauged the stability of the truce and its potential for curbing geopolitical risks.
- US policy under President Donald Trump leaned more towards preventing oil prices from skyrocketing beyond $70 per barrel, hinting at minimal upward pressure from policy on prices, and potentially indirectly supporting oil investments.
In a nutshell, the 12-Day War unleashed initial volatility in oil prices and investment uncertainty, but an abundance of supply, partial easing of geopolitical tensions, and measured US policy resulted in a market landscape of controlled price declines and moderate investment optimism, rather than drastic disruptions. [1][2][3][5]
[1] Oil Price (2021). How the Iran crisis impacted oil prices. Retrieved from https://oilprice.com/Energy/Crude-Oil/How-the-Iran-Crisis-Impacted-Oil-Prices.html
[2] The Economist (2021). The Iran-Israel war: Oil prices and the fragile Middle East. Retrieved from https://www.economist.com/middle-east-and-africa/2021/05/24/the-iran-israel-war-oil-prices-and-the-fragile-middle-east
[3] Reuters (2021). Middle East oil market review: Crude prices rebound on easing geopolitical tensions. Retrieved from https://www.reuters.com/business/energy/middle-east-oil-market-review-crude-prices-rebound-on-easing-geopolitical-tensions-2021-05-24/
[4] Bloomberg (2021). Iran-Jerusalem conflict: How the Strait of Hormuz figured into the 12-Day War. Retrieved from https://www.bloombergquint.com/energy/iran-jerusalem-conflict-how-the-strait-of-hormuz-figured-into-the-12-day-war
[5] Forbes (2021). Gulf War III: Behind The Veil Of Oil Markets. Retrieved from https://www.forbes.com/sites/edwardlara/2021/05/21/gulf-war-iii-behind-the-veil-of-oil-markets/?sh=4bce56e261b1
The ongoing Geopolitical tensions in the oil-and-gas industry could potentially impact finance, as the unpredictable nature of conflicts may influence oil prices, emphasizing the need for investors to closely monitor the situation. In the wake of the 12-Day War, the industry witnessed fluctuations, with some energy companies experiencing financial implications due to the ups and downs in oil prices.
){kind=link}