Recent tensions in the Middle East have caused a 1% increase in oil prices on Friday. This rise is due to concerns about possible disruptions in the oil supply. Brent crude settled at $90.45 a barrel, and U.S. West Texas Intermediate crude rose to $85.66. However, despite these increases, there was a weekly loss because of a negative forecast for world oil demand growth from the International Energy Agency (IEA) and worries about slower U.S. interest rate cuts.

The tensions escalated after a suspected Israeli warplane attack on Iran's embassy in Damascus. This raised fears of retaliation from Iran. Andrew Lipow, president of Lipow Oil Associates, highlighted the concern over supply disruption in the Middle East, saying, "The market's main focus is on whether Iran will retaliate against Israel," in a Reuters report.

While the U.S. expects an attack by Iran on Israel, Iranian sources suggest they aim to respond in a way that avoids a major escalation. However, concerns about supply chain disruptions persist. Tim Snyder, an economist at Matador Economics, notes that Iran has maintained its threat to shut down the Suez Canal.

The conflict's impact on global oil markets is significant. Any risk of supply disruptions could lead to a rise in prices. The ongoing conflict in Gaza, part of the broader Israel-Hamas conflict, has already affected oil prices to some extent. Despite the intensity of the conflict, Brent crude prices have remained stable at around $80 per barrel. Analysts have observed little disruption in petroleum prices so far.

However, the potential for Iran to attack Israel has increased pressure on crude oil prices, bringing them close to six-month highs. This comes as the U.S. Federal Reserve has cut rates, and OPEC has extended voluntary cuts of 2.2 million barrels per day to stabilize the market. Analysts predict that if Iran's attack results in a broader war, prices could surpass $100 per barrel.

India, one of the largest oil consumers and importers, is particularly vulnerable to such disruptions. While the initial impact of the conflict on India's trade with Israel was minimal, an escalation could jeopardize India's oil supply. India relies heavily on imports from the Middle East. To mitigate the impact of the Russia-Ukraine war on oil supplies, the Indian government has strategically increased crude oil imports from Russia, which accounted for over 35% of crude imports in 2023.

The escalating conflict between Iran and Israel has heightened geopolitical tensions and could disrupt global oil markets. Countries around the world are closely monitoring the situation due to its implications for regional stability and energy security.

Rising Threat of War: Israel's Military Preparations Amidst Middle East Tensions