Could the war between Israel and Hamas cause the price of gasoline to rise back to $5 a gallon? Oil prices rise more than 5 percent after shock attack
- When oil markets opened on Monday, oil prices rose to $87 a barrel
- Fighting between Israel and Hamas could increase tensions between the US and Iran
- It typically takes more than a week for oil to impact U.S. gasoline prices
Motorists could soon face higher prices at the pump after Hamas launched an attack on Israel over the weekend, ratcheting up geopolitical tensions in the oil-rich region.
As oil markets opened Monday morning, West Texas Intermediate, the benchmark price for U.S. crude, jumped 5 percent to exceed $87 a barrel, Bloomberg reported.
Although Israel and Palestine are not major oil producers themselves, the fighting, which has killed more than 1,100 people so far, is already having an impact across the region.
The conflict could increase tensions between the United States and Iran, which, according to a Wall Street Journal report, helped plan the attack on Israel together with Hamas.
Iran is a key oil supplier to the US and could restrict supplies if it is lumped in with sanctions. Gas prices reached a record high of $5.02 in June 2022, in the months after Russia’s invasion of Ukraine and subsequent Western sanctions.
The conflict could increase tensions between the US and Iran. Israeli soldiers are pictured in military vehicles along the border with Gaza
Last week, gasoline prices fell to an average of $3.74 per gallon – it typically takes more than a week for oil prices to affect the cost of gasoline
Shares in oil giant Shell on the FTSE 100 jumped on Monday
Gasoline prices fell to an average of $3.74 a gallon last week, leading some analysts to predict that Americans will soon see relief from rising fuel costs due to falling oil prices.
According to AAA, the price of gasoline fell to an average of $3.70 on Monday.
It typically takes more than a week for oil prices to affect gasoline prices — about half of the amount Americans pay for gas is the price of the crude oil refined to produce it.
Craig Erlam, marker analyst at broker OANDA, told Portal: “Should the focus turn to Iran, there is a possibility that tougher sanctions will be imposed, which could potentially lead to supply shortages and tighter conditions in the market.”
The conflict could also derail the Biden administration’s efforts to improve relations between Israel and Saudi Arabia – threatening hopes of Saudi engagement to boost their oil production.
Saudi officials reportedly told the White House on Friday that they were ready to increase production next year as part of the proposed Israel deal.
“At this point, the price reaction that you’ve seen is quite understandable and proportionate, just in terms of incorporating some risk premium,” Marcus Garvey, head of commodities strategy at Macquarie Group, said in a Bloomberg TV interview.
Although Israel’s oil production is broadly limited, Israel has become an increasingly significant producer over the past two decades, exporting for the first time earlier this year.
On Monday, Chevron said it had been ordered by Israeli officials to close the Tamar oil field (pictured).
Experts said last week that gas prices could fall. Pictured: the states with the highest and lowest gasoline prices on Friday
On Monday morning, Chevron said Israeli officials had ordered the closure of the Tamar offshore oil field, about 12 miles (19 kilometers) from Gaza, citing security concerns.
“People will draw parallels to the Yom Kippur War of the early 1970s, which is probably your extreme case with the embargo that followed.” “It’s entirely plausible that there won’t be any significant disruption,” he added.
This has also happened once before in 2021, when there were fights in the midst of fights.
“Our top priority is the safety of our workforce, the communities in which we operate, the environment and our facilities,” the company said in an announcement Monday.
Israel’s largest offshore gas field, Leviathan, continues to operate normally, Chevron said.