Reports about a potential Iranian attack on Israeli territory have caused oil prices to rise, and worries grew as oil prices almost reached a six-month high throughout the week.
This was fueled by fears that Iran, the third-largest OPEC (Organization of the Petroleum Exporting Countries) producer, might strike back after a suspected Israeli warplane targeted Iran's embassy in Damascus earlier in the week.
"The main focus of the market is whether Iran will retaliate against Israel," said Andrew Lipow, president of Lipow Oil Associates, in a statement to Reuters. These worries about possible disruptions to oil supply in the Middle East have boosted oil prices.
Reuters reported a 1% rise in oil prices on Friday due to concerns about potential supply disruptions. Brent crude settled at $90.45 a barrel, while U.S. West Texas Intermediate crude rose to $85.66, despite posting a weekly loss due to a bearish world oil demand growth forecast from the International Energy Agency (IEA) and worries about slower U.S. interest rate cuts.
The conflict's impact on global oil markets is big, as any risk of supply disruptions could lead to a price hike. The ongoing war in Gaza has already had some effect on oil prices.
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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 maintain market stability. Analysts predict that if Iran's attack results in a wider war, prices could rise above $100 per barrel.
Impact On Indian Oil Prices
India, being one of the largest consumers and importers of oil, faces heightened vulnerability to such disruptions. While the initial repercussions of the conflict on India's trade with Israel were minimal, further escalation could jeopardise India's oil supply. India heavily relies on oil imports from the Middle East, making it susceptible to supply disruptions.
The Indian government has increased crude oil imports from Russia, accounting for over 35% of crude imports in 2023, to mitigate the impact of the Russia-Ukraine war on oil supplies.
Reason Behind Iran's Threat to Attack Israel
Iran has issued threats of retaliation against Israel following a strike in the Syrian capital on April 1, resulting in the deaths of seven Islamic Revolutionary Guard Corps members, including two generals.
The beginning of a state-on-state conflict between Iran and Israel would mark a serious escalation in the region – a scenario that the US has hoped to avoid since the start of the Israel Gaza war in October.
US President Joe Biden says he expects Iran to attack Israel "sooner than later", as fears grow.
(With Inputs From Reuters)
