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The potential disruption of global energy shipments due to a possible Israeli strike on Iranian oil facilities has significantly impacted the world oil market. Brent crude prices climbed to $78 per barrel in early trade on October 4, marking their biggest one-day surge in nearly a year, after President Joe Biden disclosed that the US was considering supporting potential Israeli strikes on Iranian oil facilities.
This surge in crude prices has affected the share prices of oil companies. Oil exploration PSU ONGC experienced an increase of over 2% on Friday, while oil marketing companies like IOC, HPCL, and BPCL saw a decline of 1-2.5%. Investor concerns revolve around the potential ramifications of an Israeli strike on Iranian oil refining assets, which could trigger retaliation and escalate the ongoing conflict.
India, as a major oil importer, is closely monitoring the situation, but officials have reassured the public that the country is prepared to handle volatile crude oil prices. The government has tools in place to manage price fluctuations, and India has previously experienced even higher crude oil prices than those currently observed.
The US, the European Union, and other allies are calling for an immediate ceasefire in the conflict. President Biden acknowledged that the US is discussing with Israel its response, which could involve strikes on Iranian oil facilities. Despite these discussions, Biden stated that he would not negotiate publicly and emphasized that the US 'advises' Israel, not 'allows' it to take certain actions.
Tai Hui, chief Asia market strategist for JPMorgan Asset Management, highlighted the market's fear of potential supply disruptions from Iran. While demand for oil is expected to remain robust, the risk to the supply side is a significant concern. Nymex and Brent crude prices are poised for weekly gains of approximately 8%. Analysts from ANZ suggest that while supply risks are heightened, the impact is likely to be limited. They caution that any Israeli strike on Iranian oil assets could provoke a fierce response from Iran, potentially leading to further disruptions in oil supplies. It's worth noting that OPEC has spare production capacity, and global crude supplies are not yet disrupted by the current unrest in the Middle East.
Source: OMC shares lower, ONGC spurts over 2% as Brent tests $78 on risk to Iranian oil facilities