The commodities market, with its diverse range of products, often reflects the intricate interplay between geopolitical events and economic factors. Among these commodities, oil stands out as a consumable item, crucial for fuel production, and deeply intertwined with geopolitical circumstances.
Brent Crude Oil has garnered significant attention from market analysts and participants owing to its sustained decline over the last two and a half months, coinciding with the commencement of the Middle East conflict. This downward trend, contrary to conventional expectations, merits close scrutiny.
Throughout history, conflicts involving Israel and its neighbouring nations have wielded substantial influence on global oil prices. This phenomenon primarily stems from the fact that several Middle Eastern countries, which are members of the Arab League and key suppliers of global oil (as part of OPEC), are intricately tied to these geopolitical events. The Yom Kippur War in 1973, for instance, led to an OPEC oil embargo against the United States, resulting in fuel rationing and soaring oil prices.
Despite the heightened tensions in the Middle East, especially the escalation of conflict between Israel and the Gaza Strip, Brent Crude Oil has exhibited a surprising decrease in recent days. On December 26, the oil was trading at $80.50 per barrel at FXOpen, but it slipped below the $80 mark, reaching $79.15 at FXOpen at the end of the last trading session. There was a slight rebound in the early hours of the morning to $79.52 at FXOpen.
This contrasts with the trend seen two years ago during the intensification of the conflict in Ukraine, where oil prices skyrocketed. In March 2022, Brent Crude reached over $125 per barrel.
Amidst the current tensions involving Iran, Saudi Arabia, and their opposition to Israeli operations, the absence of any discussion regarding oil embargoes against the US and its allies is notable. Traditionally, such geopolitical situations might trigger a surge in oil prices. However, the current relatively stable oil prices in the face of escalating conflicts present an intriguing and unexplored market dynamic. As geopolitical events continue to unfold, monitoring the fluctuations in Brent Crude Oil prices becomes a captivating narrative, revealing the intricate dance between global events and commodity markets.
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