Oil prices are rising rapidly in the world market amid tensions in the Middle East. The price of a barrel of Brent crude rose to 108.77 dollars.
This is the highest one-day increase in oil prices since the corona pandemic in 2020. Earlier, the price had risen by around 28 percent in the last week alone.
Consumers and businesses worldwide will face weeks or months of higher fuel prices as a result of the Iran war. In such a scenario, suppliers are struggling with damaged facilities, supply chain disruptions and increased shipping risks.
Top oil exporter Saudi Arabia is increasing oil shipments from the Red Sea. But according to shipping data, this is not enough to cover the shortage of oil from the Strait of Hormuz.
ANZ senior commodity strategist Daniel Hines said oil prices had risen. That’s because Middle Eastern producers are cutting output as oil piles up in warehouses. If the situation gets to the point where they have to shut down their oil wells, not only will production drop, but it will take time for supplies to return to normal even if the conflict ends. As a result, prices will remain high for a long time.
JPMorgan Chief Economist Bruce Kasman said, ‘The global economy is still dependent on Middle Eastern oil and natural gas supplies, much of which passes through the Strait of Hormuz.’
He told Reuters that in the short term oil prices could rise to around $120 per barrel. If the conflict subsides a bit later, the price may fall again a bit. However, unless there is a clear and effective political solution, Brent oil prices may remain high at around $80 per barrel until the middle of the year.
Kasman also said that in such a situation, the global economic growth may decrease by about 0.6 percent year-on-year in the first six months of this year and consumer price inflation may increase by about 1 percent.
If the conflict widens and lasts longer, oil prices could rise above $120 a barrel, pushing the global economy into recession, he warned.
