Escalation in Gaza: Impact on Oil and Gas Markets

Recently, Israel began a ground operation in Gaza, and this has stirred up a lot of uncertainty in the oil and gas markets. The big worry for oil prices is if this situation leads to more trouble with other countries nearby. The Middle East supplies a good amount of the world's oil, and Iran, which supports groups in the region, has said that this action might make everyone react.

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When Israel started its ground operations, the price of crude oil went up. West Texas Intermediate, a type of crude oil, rose by about 3.2% and went above $85 per barrel. However, this is still less than the highest point it reached, which was just above $90. So far, there hasn't been a noticeable impact on the global oil supply.

Giovanni Staunovo, who looks at commodities for UBS Group AG, said, "People are worried that this war might lead to a bigger fight in the region, which could disrupt oil supplies. This could push up oil prices." He also mentioned that prices will probably be higher at the beginning of the week, but for now, there haven't been reports of problems with oil supplies.

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Since the conflict started, there have been big swings in how much oil costs during a single day. A way to measure this is called oil-market volatility, which looks at how quickly prices change. Last Friday, it reached the highest level it's been since June.

Over the weekend, there was more fighting with a group called Hezbollah, which is supported by Iran and based in Lebanon. This might make traders even more worried. The worst thing that could happen for oil markets is if something disrupts the Strait of Hormuz, which is a very important route for moving oil.

Unlike oil, the market for natural gas has already felt the effects of the conflict. A gas field called Tamar was shut down by Israel after attacks by a group called Hamas earlier this month. Even though there's been an increase in production at another field called Leviathan nearby, this still shows that there are risks for getting gas from this region.

There's still a threat of things getting worse. Iran didn't just call for a stop to oil going to Israel, they also said there might be more action over the weekend, although they didn't say what exactly. Last week, the US targeted some places in Syria, reminding us that even the biggest economy in the world could get involved in this conflict.

There were also warnings about ships in the Red Sea. This happened after a US aircraft carrier in that area stopped missiles that were heading towards Israel from Yemen.

Because of all this, in the world of money and markets, oil has been a major topic. Some people are making bets that the conflict might not stay limited to just Israel and Gaza. They're buying contracts that would let them make money if oil prices go above $100 per barrel in the near future.

Michael Tran, who studies these things for RBC Capital Markets, said, "Dealing with the ups and downs of oil prices has been really tough." He added, "Right now, there's a big chance that prices might change a lot because of how the conflict is spreading.

Also Read: Oil Prices Drop Due to Middle East Conflict and Economic Concerns