Oil and gas prices are rising hesitantly: Why are markets reacting so calmly to the war in Israel?

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The specter of energy shortages haunts Europe following Hamas’ surprise attack on Israel. Shortly after the attack, experts predicted “turbulent days” for global stock markets. What happened – nothing. For example, stock prices in Switzerland’s leading index, the SMI, move as slowly as the price of crude oil.

There can be no comparison with the situation 50 years ago, when the Yom Kippur War between Israel and various Arab states led to an oil price crisis with serious economic consequences.

We are far from that today. The price of oil is rising, but slowly. Economist and raw materials expert Cornelia Meyer says: “A week after the start of the conflict, the oil price is still lower than at the end of September.”

Unrest in the gas market

The price of gas is more sensitive: It has risen almost 50 percent since the start of the war, reaching its highest level in more than six months. Meyer said the volatility in the gas price shows the uneasiness of the markets. Tension is felt even though gas storage facilities are still 90 percent full and there are no restrictions on crude oil deliveries. However, the price of gas is miles away from last year’s highs, which skyrocketed due to the war in Ukraine.

For Swiss consumers, the war in the Middle East is barely noticeable, for example, at the petrol pump. “But this could change suddenly if the conflict spreads,” warns Meyer.

What is Iran doing?

What matters is what will happen in Iran. Calls for Iran to close the Strait of Hormuz are circulating online. 17 million barrels of oil pass through this strait every day. This accounts for approximately 17 percent of global demand. Not only Iranian oil but also oil from the entire Arabian Peninsula is transported through the Strait of Hormuz.

If Iran faces additional sanctions as a result of the Israeli war and effectively blocks oil exports in retaliation, the market will dry up. Since oil from Russia is no longer available, there is no alternative. However, it does not seem possible for such a rise to occur at the moment. Oil producing states have nothing to do with this issue. “Saudi Arabia and the United Arab Emirates do not want unstable conditions in the region,” Meyer said. They want to “rebuild” their economy in peace. Egypt is also interested in de-escalating tensions to protect trade through the Suez Canal and its booming tourism business. Moreover, Egypt is not ready to accept more refugees.

Neither Israel nor Saudi Arabia has any interest in the crisis-ridden region, which is completely torn apart considering the problems in Libya, Syria, Yemen, Lebanon and Iraq. This does not mean that the danger has been averted: “The situation is more dangerous than it has been for a long time,” says Cornelia Meyer.

Source :Blick