Oil prices reacted to the military conflict in Israel: this did not help the ruble

The Russian currency continues to decline

The escalation of the military conflict between Israel and the Palestinian group Hamas will allow oil prices to return to above $100 per barrel, international experts predict. This will happen if Iran, which has serious raw material potential and is accused by representatives of the Western world of providing financial and military support to radicals from the Gaza Strip, is drawn into the confrontation. Forecasts for a significant increase in the price of oil are quite justified: in just one trading day after the escalation of the confrontation, quotes for “black gold” strengthened by at least 5%.

Exchange oil prices, which had fallen over the previous two weeks from $97 to $84 per barrel, began to rise in price again: at the auction on October 9, the cost of a barrel of Brent jumped to almost $88. The reasons for what happened are not economic, but geopolitical: first of all, the attack of the Palestinian group Hamas on Israel. Western market traders predict the beginning of a protracted military clash, in which neighboring Middle Eastern powers, which are major suppliers of “black gold” to world trading platforms, will have to indirectly participate in one way or another.

Mainly, according to analysts at the international investment bank RBC Capital Markets, concerns are related to the risk of Tehran being drawn into the conflict, which the Israelis suspect of helping the group that attacked them. Having concentrated on economic sanctions against Russia, Washington has for about a year now practically not interfered with the export of Iranian oil, which had also previously become the object of trade restrictions. This year, as a result of reduced control over maritime transportation, daily production of raw materials in the Islamic republic increased by almost 700 thousand barrels, which made up approximately half of the reduction in production and foreign sales of hydrocarbons, which was agreed upon by OPEC+ participants, including Russia and Saudi Arabia . Moreover, Tehran, according to stock exchange analysts, concluded additional export deals not only with Asian buyers, who never refuse cheaper supplies, albeit condemned by the West, but also with European and even overseas counterparties.

International experts are confident that if the Iranians cannot “disown” their participation in organizing missile attacks on Israel, then Washington may tighten sanctions against the Islamic Republic’s raw materials industry. Moreover, the threat of a “retaliation strike” against Iranian oil fields, which could put an end to the development of the local extractive sector, may also be on the agenda. The consequences in such circumstances risk being the most unpredictable. You can recall that in 1990, after the outbreak of military clashes in the Persian Gulf, oil prices rose by 240%, and during the war in Iraq in 2003 and in Libya in 2011, prices jumped by 40-45%.

According to the director of the corporate finance department of IVA Partners, Artem Tuzov, it is not yet clear whether the conflict will remain local or will move into an actively developing phase, in which neighboring countries will be drawn in, in addition to Israel and Palestine. “Traders conduct trading operations taking into account the risk of the most negative events. The prices set on the stock exchange include the threat of bombing the oil fields of neighboring countries. The conflict may escalate to the stage when money is no longer considered the main factor in the behavior of market players, since the profit from momentary high prices will not be compensated by the loss of purchasing power of consumers of raw materials,” the analyst believes.

A more balanced approach to the cost of a barrel may appear among world stock exchange players only after the position of the states close to the military conflict zone becomes clear: not only Iran, but Lebanon and Syria, which also have significant mining resources. “If the EU or the US decide that these states are taking part in what is happening, then the entire region could catch fire,” warns financial expert, author of the economic Telegram channel Alexey Krichevsky. “This will be a major blow to oil supplies, and prices will easily return to last year’s maximum levels, but on a more permanent basis.”

Meanwhile, although a short-term increase in commodity prices can provide Russia with additional budget revenues, it is unlikely to seriously strengthen our country’s economy. In particular, a positive effect on the ruble exchange rate from an increase in oil prices is extremely unlikely. Despite the sharp rise in hydrocarbon prices associated with the heating up of the conflict in the Middle East, the Russian currency fell in price on October 9: the dollar rose to 102 rubles and buyers moved to the next target zone of 104-105 rubles, notes BitRiver financial analyst Vladislav Antonov. “Given this behavior of market players, it is worth assuming that the next military conflict in the world’s main mining region will not have a significant impact on the ruble exchange rate.”