Israel-Palestine war might create risks at energy supplies, expert says

The Israel-Palestine war would create major global risks by disrupting energy supplies and pushing up oil prices, an expert says, The Guardian reports.

In the article “How will the Israel-Hamas war affect oil prices and the global economy?”, the Guardian Economics Editor, Larry Elliott, discussed the effect of the current conflict between Israel and Palestine on energy prices.

According to the article, one of the rules of the thumb of geopolitics is that recessions are sparked by a sharp jump in oil prices, and the cost of crude is sensitive to events in the Middle East.

Having said that, Elliott shares three main scenarios:

The first scenario – and the best-case one for the global economy – is that the war is contained to an Israeli ground assault on the Gaza Strip. In those circumstances, oil prices would stabilise at about their current level of $93 (£76) a barrel and could soon start to fall back.

The second scenario involves a broader regional conflict, starting with fighting on Israel’s northern border with Iranian-backed Hezbollah forces in Lebanon but, eventually, dragging Iran into the conflict. The arrival of US carrier groups in the eastern Mediterranean suggests Washington is making contingencies for this.

By highlighting Iran’s position, the article shared that Nicholas Farr, an economist at the research firm, Capital Economics, said: “Iranian-backed Hezbollah has exchanged missile fire with Israel from Lebanon, which has the potential to open up a new front in the conflict. If Iran were drawn into the war this would create major global risks by disrupting energy supplies and pushing up oil prices. Natural gas prices could be affected, too, if there’s disruption to LNG [liquefied natural gas] exports.”

The third scenario says that, sketched out by the historian, Niall Ferguson – in which China takes advantage of the crisis to impose a blockade on Taiwan and, by doing so, escalates a regional conflict in the Middle East into a third world war.

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