Source: Jin10 Data
Israel and Hezbollah have erupted into fierce fighting, and Iran's retaliation against Israel has yet to come, Israel's response will be equally important and may endanger 3% - 4% of the global oil supply.
After launching 100 warplanes to strike targets inside Lebanon's Hezbollah by Israel over the weekend, Hezbollah fired more than 320 rockets at Israel, intensifying market concerns about the escalation of the situation in the Middle East and causing oil prices to rise on Monday.
The Iran-backed Hezbollah said the attack was in retaliation for Israel's killing of senior commander Fuad Shukr in Beirut last month. According to Reuters, Israel said its preemptive strike was aimed at foiling a larger-scale attack by Hezbollah.
Vivek Dhar, a commodity strategist for mining and energy at Commonwealth Bank of Australia (CBA), said the tension in the Middle East and the risk of a wider conflict will continue to drive up oil prices.
"While market expectations are focused on Iran's attack against Israel without triggering a wider regional conflict, Israel's response is equally important. Israel's response could include attacking Iran's oil supplies and related infrastructure, which would jeopardize 3%-4% of global oil supply."
Cedric Chehab, Executive Director and Global Head of Risk at BMI Research, said the Sunday clash does not mean that "total war" is imminent.
Speaking on CNBC's Squawk Box Asia program, Chehab said, "What Hezbollah and Iran want to do fundamentally is establish deterrence. So in terms of deterrence, they've achieved it."
He added that although the confrontation between the two sides could escalate into a wider conflict, there is still room for easing.
Leaders of Israel and Iran both 'do not want the situation to get out of control and escalate...Remember, Iran has an untested new president, our idea is that Iran will exert pressure on Israel, but not necessarily engage in direct confrontation.'
While Dahal agrees with Chehab's view that the events of last Sunday are unlikely to be a catalyst for a full-scale war in the region, he pointed out that Iran's retaliation against Israel has not yet come, following the assassination of Hamas political leader Ismail Haniyeh in Tehran last month.
Dahal also said that the progress in Gaza ceasefire negotiations will be an indicator of how Iran, Hezbollah, and Hamas interpret the events of last weekend.
Early Monday, Reuters reported that talks held last Sunday on a Gaza ceasefire failed to reach an agreement, with Egyptian security sources telling Reuters that both Hamas and Israel disagreed with the proposals put forward in Cairo by mediators.
Dahal added that although the escalation of the situation on the surface damages the ceasefire negotiations, the fact that Israel has successfully thwarted Hezbollah 'may force Iran and its proxies to recognize that Israel is in a position of strength, especially with U.S. support, making the ceasefire agreement easier to achieve.'
He also predicted that the trading price of Brent crude oil futures for September will be between $75 and $85 per barrel, with a greater upside potential for Brent crude oil futures if the hopes for a Gaza ceasefire wane and Iran's retaliation against Israel is still 'ready to go'. 'More broadly, there is an upside risk for oil prices as Iran gets involved in a wider conflict in the Middle East,' Dahal said.
Editor / jayden
