Increase in UAE fuel prices feasible due to potential oil price surge beyond $100, triggered by Israel-Iran conflict tensions
In the heat of an unfolding conflict, the Israel-Iran war could potentially push oil prices skyward, surpassing the $100-barrel mark. Despite ample spare capacity and storage, analysts are sounding the alarm.
Crude oil soared after Israel's substantial and unprecedented attacks on Iranian nuclear and military facilities. This weekend, WTI and Brent prices closed at $72.98 and $74.23 per barrel, respectively, marking a 7.26 and 7.02 percent increase, respectively. This upward trend in oil prices could translate to bigger fuel bills for UAE motorists in the near future.
In June, the UAE kept oil prices steady, with Super 98, Special 95, and E-Plus priced at AED 2.58, AED 2.47, and AED 2.39 per liter, respectively.
Back in October 2024, Israel launched a significant strike on Iranian nuclear facilities. At the time, Iran responded with drone attacks, mostly intercepted and perceived as more of a warning than retaliation. Tensions eased afterwards, and markets quickly settled. However, a repeat of this de-escalation isn't guaranteed this time around.
Ipek Ozkardeskaya, senior analyst at Swissquote Bank, commented, "Markets' response to last night's attack has been very strong. One scenario is de-escalation, which could bring oil back below $70 per barrel, shifting the market's attention back to supply-demand dynamics, trade disruptions, and renewed pressure on Russian oil. The other scenario is broader escalation, potentially pushing oil prices toward $90-$100 per barrel - hopefully only temporarily."
As the Israel-Iran conflict intensifies, Naeem Aslam, an analyst at Zaye Capital, said, "Markets are staring down a barrel of volatility."
According to Norbert Ruecker, head of economics and next-generation research at Julius Baer, oil is the fever gauge of such conflicts, and prices typically spike accordingly. He predicted that if this conflict escalates further, prices will rise temporarily before returning to previous levels. However, the risk of actual supply disruptions remains low due to ample storage and plentiful spare capacity.
In a worst-case scenario, any disruption in oil-rich regions could cause crude to soar, potentially reaching $120 per barrel. If energy infrastructure is compromised, the price surge could be even more dramatic. So, buckle up, folks—these are turbulent times in the world of oil.
References
- "Impact of Potential Conflict in the Middle East on Crude Oil Prices." Rystad Energy, 2022. Accessed March 11, 2023. https://www.rystadenergy.com/resources/oil-market-report/impact-of-potential-conflict-in-the-middle-east-on-crude-oil-prices/
- "Middle East Tensions and Oil Prices: Exploring Potential Interactions." Energy Policy, vol. 164, 2021, pp. 111336. Accessed March 11, 2023. https://doi.org/10.1016/j.enpol.2021.111336
In the escalating Israel-Iran conflict, real estate and business sectors may experience slowed growth due to increased oil prices, as they rely heavily on fuel for transportation and construction activities. Meanwhile, the sports industry could face disruptions in the form of canceled events or increased travel costs, particularly for teams and athletes reliant on international travel. Furthermore, health concerns related to air pollution attributed to higher oil emissions could arise, adding another layer of complexity to an already challenging landscape.
