Global oil prices have experienced a significant increase since the outbreak of conflict between Israel and Hamas. This situation has raised concerns about the potential impact on energy production in the Middle East and its potential implications for Nigeria, which is Africa’s largest oil-producing country.
As of Wednesday, the Brent crude oil benchmark, which is significant for Nigeria, reached $86 per barrel, marking a 3.2 percent increase since the conflict began. West Texas Intermediate (WTI), the equivalent benchmark in the United States, also rose by 4 percent to $84.15.
The conflict’s potential to disrupt energy flow in the region has been a point of concern. Israel has warned of a prolonged and challenging war, which could result in retaliatory strikes on Gaza and potentially draw Iran into the conflict. The involvement of Iran could have implications for the region’s energy supply.
While Israel itself is not a major oil producer, the conflict’s broader consequences could increase uncertainty in the region and lead to stricter enforcement of sanctions on Iranian oil. Iran’s foreign ministry has voiced support for Hamas’s actions as an act of self-defense.
Additionally, Israel’s suspension of production at its offshore Tamar gasfield has caused European gas futures prices to surge by about 13 percent. This further contributes to the energy market’s uncertainty.
Analysts have noted that the conflict might also complicate the Biden administration’s efforts to negotiate a deal with Saudi Arabia to normalize relations with Israel. This, in turn, could affect Saudi Arabia’s willingness to increase its oil output. The Israeli government’s commitment to a strong military response may hinder parallel discussions with Saudi Arabia on normalization.
In summary, the Israel-Hamas conflict has introduced significant uncertainty into the Middle East, which could potentially affect oil markets and broader geopolitical dynamics in the region, with potential consequences for Nigeria as a major oil producer.