The US Investment Bank stated in a research note that the conflict and its repercussions on the Red Sea will, in turn, lead to higher food prices, due to the rise in fertilizer prices and transportation costs.
He pointed out that the reduction in oil supplies by Saudi Arabia and Russia, since the second half of 2023, led to an increase in oil prices, adding: “The recent conflict in Israel constitutes a new source of upside risks, if oil production or the supply chain in the region is disrupted.”
“Rising energy prices and broader market volatility as a result of the recent conflict reinforce our view of focusing on fixed income and high-quality equities,” the bank added.
Oil prices have witnessed a sudden rise since they reached their lowest level last June, and “Brent crude oil rose from $72 per barrel at that time to an average of $82 now.”
The bank said: “After the OPEC+ alliance agreed to reduce oil production and voluntary cuts by Saudi Arabia and Russia, the confrontation came between Israel and Hamas, and led to a rise in oil prices, which reflects a potential premium on supply risks.”
He continued: “The important factor here will be the role of Iran and other Middle Eastern countries in this conflict, and whether this could affect oil production expectations or supply disruptions in the region.”
While Iran has so far denied direct knowledge of the October 7 operation, known as the Al-Aqsa Flood, “it was a supporter of Hamas… The impact on the oil market is likely to come in the form of banning the export of Iranian oil, or disrupting the vital shipping channel in the Strait of Hormuz,” he said. the bank.
But for now, the bank says: “This risk is considered low, but this is worth monitoring as the event continues to develop.”
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