The situation in the conflict between Israel and Hamas seems to be escalating. The IDF began attacking targets in Gaza with ground troops and tanks on Saturday. Fears of a major escalation could drive up oil prices.
Oil prices initially showed the urge to go up after the Hamas attack on 7 October. Thus, WTI briefly rose to over 89 US dollars per barrel at the peak and Brent reached the 92 US dollar mark. However, when it became clear that the Israeli forces would not launch a quick offensive into the Gaza Strip, oil prices fell back somewhat and are currently hovering around $84 and $88 respectively.
Fear of oil supply collapse
On Saturday night, the IDF has now intensified its attacks and has advanced with ground troops into the north of the Gaza Strip. If this is the beginning of the announced offensive, there is a danger that Hezbollah will open a second front from Lebanon and possibly even a third front also from Syria. In this case, it is to be expected that US troops will intervene more strongly in the conflict on the ground. This is to be expected in particular because various US bases in the region have already been attacked by drones. An escalation is likely to intensify these attacks and force the US to act.
Since Iran, which is not officially involved but which supports both Hamas and Hezbollah in the background, could increase its role in the conflict, there is a risk of a conflagration. This threat could significantly increase fears of a significant drop in oil supply and send oil prices northwards again. In this case, it cannot be ruled out that WTI will exceed the $90 per barrel mark quite quickly and Brent will strive towards $100 per barrel.