Oil being one of the most important natural resources which is used not only to fuel vehicles but is also used for several other purposes, is produced in abundance in many Middle Eastern countries. It is used in various industries, to heat buildings and to produce electricity. In 2022, almost 4.29 billion metric tons of oil was consumed and its consumption is seeing a rise from last 3 decades and was only reduced during covid pandemic. It is an important resource for all the countries but current situation i.e Israel-Palestine conflict could affect it as there was a sudden surge in oil prices after the start of conflict. Conflict or instability in the region can disrupt oil production and transportation. Although experts are predicting that it was a short- term increase as neither Israel nor Palestine are exporters of oil.
Now there is another perspective too which is a broader regional conflict as Hezbollah is also attacking Israel from Lebanon and it could result in Iran’s intervention in the conflict. If Iran ultimately enters, it could disrupt the energy supplies that could result in increased oil prices as Iran is exporting almost 1.5 million barrels per day of oil and most of it is sold to China. There could be another alarming situation if Lebanon, Syria and Egypt intercede in the war. United States of America has already deployed its aircraft carriers to openly support Israel, might enter the war too. Some economists suggest that in this case, oil prices could reach 150 dollars per barrel which will ultimately affect global economy and increase inflation all over the world.
Analyzing the oil producing countries, Saudi Arabia is the biggest oil producer in region producing almost 9 million barrels a day. Other key players are United Arab Emirates and Iran. Qatar is a key supplier of LNG to Europe and 16% of its exports are sent to Europe. If all of these Islamic countries take a stand to support Palestine in this war, it can leave huge footprints on oil supplies in the global arena which will definitely be resulting in increased oil prices. Gas supplies would also face repercussions as Europe’s import of gas from Russia has ended last year due to Russian-Ukraine crisis. If prices increase it would be beneficial for these countries but a hyper increase in prices would reduce the demand of oil.
Historically, at the time of Yom Kippur war, also known as Arab-Israel war in 1973, an armed conflict between Israel and Arab coalition forces that was led by Egypt and Syria, oil prices were highly altered. Back then, US was supporting Israel as of today, and at that time Arab members of OPEC decided to reduce oil production by 5% per month. Ultimately, Saudi Arabia restricted oil supplies to the US which resulted in the 1973 energy crisis and as a consequence of this restriction, global oil prices first doubled and then quadrupled. This sudden surge had a great impact on world economy affecting the supply of fuel as well. Even though now circumstances are different from the past but if Middle Eastern countries take any step regarding oil exports, the world might witness significant ramifications.
Analyzing the current situation, many days have passed since the outbreak of this conflict and oil prices are somewhat stable and no indication is there by Middle eastern countries regarding
oil exports to world. No one can predict that will this war end anytime soon or not as many countries including UN are pressuring Israel for a ceasefire but on other hand Israel continues to bomb Gaza more aggressively than ever. Moreover, Iran has already issued a warning to Israel that if a ground operation is launched, they would take part in war and have started military exercise too, whereas Israel is confident to launch it anytime. Considering all these scenarios, escalation of the conflict would definitely result in a regional conflict that would have a strong impact on global oil exports and oil supplies.
It’s important to recognize that the dynamics in Middle East and the global energy landscape are highly diverse and subject to change. The future of oil exports from the Middle East will depend on how these factors evolve over time. Additionally, the region is characterized by diverse countries, each with its own unique circumstances, so the impact of current events may vary from one country to another. Many countries are striving to reduce their dependence on fossil fuels, which could impact the demand for Middle Eastern oil. The global effort to combat climate change may lead to more stringent environmental regulations and commitments to reduce greenhouse gas emissions. This can impact the demand for oil and lead to changes in energy policies. Both positive and negative aspects are there yet Middle Eastern regional balance and stability being threatened by this discord is more obvious that can be problematic for the existing world order too.
Opinions expressed in this article are those of the author.