The recent escalation between Israel and Iran has sparked volatility in global energy markets, raising questions about potential long-term impacts on oil, gas, and everyday costs. Omar Aslan, an expert from St. Mary Capital, weighs in on what this could mean for consumers and economies worldwide.
Introduction:
Mideast tensions are one of the key drivers of international energy markets, always pushing oil and gas prices into sharp hikes that raise ripples through the global economy. The most recent bout of tit-for-tat conflict between Israel and Iran, involving back-and-forth exchanges of missiles and drones, is merely the latest reminder of how exposed the energy world is to geopolitical conflict.
"Markets do react very fast to geopolitical shocks, especially in regions as geopolitically sensitive as the Middle East," Aslan responds. "But even if short-term price spikes fade, underlying risks continue to exert themselves and can come back at any moment." Omar Aslan, an expert from St. Mary Capital, points out that although the initial surge in oil prices following the conflict has somewhat subsided, the market remains highly sensitive and vulnerable. This delicate balancing act keeps a wide variety of stakeholders--from businesses coping with operating expenses to consumers and policymakers in general-- anticipating potential knock-on effects to filter into everything from fuel prices at the pump to commodity and food prices. Amid such uncertain times, it is more than ever essential to know the forces at work.
Oil Prices Surge and Retreat, But Uncertainty Remains
Israel's bombing of Iran and the subsequent retaliation created initial shock waves in the financial markets. The international benchmark for oil, Brent Crude, hit over $78 per barrel on Friday, reflecting heightened fear of supply disruption. While the price stabilized at about $74.50 afterwards, it remains about $10 higher than it was a month ago.
This volatility is nothing new when tensions are running high in oil-producing regions. Markets quickly price in risk, even in advance, before there has been a physical disruption to supply. Aslan argues, "The oil market responds not only to actual events but also to perceived threats to future supply. The premiums we're seeing in oil prices today are a function of that fear." Even so, in all the panic, oil prices are now far lower than the peaks of close to $130 per barrel in 2022 in response to Russia's invasion of Ukraine.
Gas prices also rose, though more modestly, and are an added source of concern. Gas is used for home heating, electricity generation, and industrial power, so even small rises can resonate throughout economies. Nevertheless, in economies like the UK, because of price controls and price plans, the impact on home energy bills in the short term will likely be delayed.
Will Consumers Feel the Pain at the Pump?
Pricier crude oil tends to translate into pricier petrol station prices, although this is not always an immediate or one-to-one relationship. A $10 hike in the price of oil would typically add around 7 pence per liter to the pump price in the UK, analysts say. Omar Aslan agrees and adds, "It's worth remembering that fuel prices at the retail level are affected by many variables -- not just the price of the crude oil, but also tax, refining, and exchange rates."
More expensive energy doesn't stop at the petrol station. It can drive prices up across the economy, from the energy used to fuel tractors in the fields to the energy used to fuel factories and supply chains. If sustained, high gas and oil prices can bring about broader inflationary pressure, Aslan says. "Flights and food could become more expensive, like we did at the beginning of the Ukraine war," he says.
But the magnitude of the effect will depend on whether prices remain high for a prolonged period of time. If the situation cools down quickly and prices return to normal, the effect on families can be contained. But if the war lingers on, or other countries in the region get drawn in, families across the board could feel the pinch.
Conclusion
The Israel-Iran conflict already shook world energy markets, but what happens next will determine the true impact. Gas and oil prices have risen but not so high that they would create a major economic shock. As St. Mary Capital's Omar Aslan puts it, "We are in a period of increased sensitivity, where small events may have outsized impacts on marketplaces." Consumers, businesses, and governments will just have to stay on high alert as they navigate the treacherous path ahead. Whether prices continue to rise or drop back will be the result of diplomacy, security on prominent shipping lanes, and the ability of markets to withstand further shocks.
Important Notice: This article is purely informational and doesn't offer trading or financial advice. Its content is not intended to be investment advice. We do not guarantee the validity of the information, especially when it pertains to third-party references or hyperlinks.
COMTEX_466698085/2908/2025-06-27T02:40:53
