Oil prices increased by 1% on Friday due to geopolitical tensions in the Middle East and worries about possible supply interruptions. U.S. West Texas Intermediate crude increased to $85.66 per barrel, while Brent crude finished at $90.45 per barrel. Following a purported Israeli warplane raid on Iran's embassy in Damascus, the market was centered on possible Iranian reprisal. Iranian sources propose a reaction to prevent a significant escalation, while the United States anticipates an attack on Israel. If the situation worsens, analysts caution about potential problems with the supply chain and price increases.


Fears of possible disruptions to supply have caused oil prices to climb 1% on Friday as a result of geopolitical tensions in the Middle East. Although U.S. West Texas Intermediate crude posted a weekly loss, it recovered to $85.66 after the International Energy Agency (IEA) released a negative estimate for global oil demand growth and concerns about slower U.S. interest rate reductions. Brent crude ended the week at $90.45 per barrel.

 

A purported Israeli warplane attack on Iran's embassy in Damascus is the cause of the current tensions, which has sparked worries of Iranian reprisal. Andrew Lipow, head of Lipow Oil Associates, stated, "The market's main focus is on whether Iran will retaliate against Israel," underscoring the concern that events in the Middle East may disrupt supply and drive up prices.

Iranian sources have suggested a reaction meant to prevent a significant escalation, even if the United States anticipates a strike by Iran against Israel. But supply chain problems continue to be a worry, as Iran continues to threaten to close the Suez Canal, according to Tim Snyder, an economist with Matador Research.

 

The war has a big effect on the world's oil markets because any disruption in supply could result in higher prices. Oil prices have already been impacted in part by the ongoing battle in Gaza, which is a component of the larger Israel-Hamas conflict. The price of Brent crude has stayed steady at about $80 per barrel despite the ferocity of the battle; analysts have not noticed much movement in the price of petroleum thus far.

But with crude oil prices almost at six-month highs, the prospect of an assault by Iran on Israel has increased pressure. In an effort to preserve market stability, OPEC has extended its voluntary cutbacks of 2.2 million barrels per day. This has coincided with rate decreases by the US Federal Reserve. Analysts estimate that prices might surpass $100 per barrel if Iran's offensive sparks a larger conflict.

 

Influence on the price of oil in India
Being one of the biggest importers and consumers of oil, India is especially susceptible to these kinds of interruptions. India's trade with Israel was initially mostly unaffected by the crisis, but given its reliance on Middle Eastern imports, an intensification of the conflict could pose a threat to India's oil supplies. To lessen the effects of the, the Indian government has deliberately increased its purchases of crude oil from Russia, which would make up more than 35% of all imports in 2023.

Geopolitical tensions have increased due to the Iran-Israel conflict, which is getting worse and has the potential to affect the world's oil markets. Countries all over the world are keeping a careful eye on the situation because of the potential effects on energy security and regional stability.