Oil Prices: A Puzzle to Solve. What to Expect?
The Impact of Geopolitical Tensions on Oil Prices
Oil prices are on the rise, set to close higher this week after consecutive days of losses.
Forecasts on the US economic growth and other global powers, which influence demand, join the fluctuating expectations on supply, with the Middle East conflict that could still surprise with an escalation and impact crude oil prices.
The Uncertainty of Middle East Conflict
Despite the current minimal impact of Middle East events on crude oil prices, anything could still happen.
A severe escalation of tensions in the Middle East would push oil prices above $100 per barrel and reverse the recent downward trend in global inflation, as stated by the World Bank a few days ago.
The latest World Bank report on commodity markets states: “A moderate supply disruption linked to the conflict could push the average Brent price this year to $92 per barrel.
A more severe disruption could drive oil prices above $100 per barrel, boosting global inflation in 2024 by almost one percentage point.”
Indermit Gill, Chief Economist of the World Bank, said that global inflation remains undefeated.
A key force for disinflation – the decline in commodity prices – has substantially hit a wall.
“This means that interest rates could remain higher than currently expected this year and next.
The world is in a vulnerable state: a severe energy shock could undermine much of the progress made in reducing inflation in the past two years,” he added.
The ongoing events report that Israel has intensified airstrikes on Rafah after stating it would evacuate civilians from the southern city of Gaza and launch a full-scale assault despite warnings from allies that this could cause an unacceptable number of casualties.
