The risk of an escalating war between Israel and Iran is testing the global market’s faith that crude oil prices would be insulated from a widening of hostilities across the Middle East.
For decades, conflicts in the oil-rich region frequently spooked oil markets and weighed on the economy. But now, Middle East military skirmishes are causing more shrugs than drastic price spikes — a welcome development for the Biden administration, which has faced political criticism from Republicans over fuel prices and is trying to contain the fallout from Iran’s launch of nearly 200 missiles into Israel on Tuesday.
Increased oil production from the United States, Brazil and other places in the past two decades has diversified the global fuel supply, which means oil markets rely less on Middle East shipments that Tehran could disrupt, energy and security analysts told POLITICO.
“For those of us who spend our lives looking at the effects of a [Middle East] crisis on oil prices, obviously the past 10-plus years have been a complete washout,” said Michael Knights, an analyst at the think tank The Washington Institute for Near East Policy. “No matter how insane the thing is, it has a minimal impact on oil. The market has proven time and time again it can make up shortfalls.”
