Oil prices no longer look at geopolitical risk premium for current ME dispute By Investing.com
Oil prices have remained surprisingly stable despite tensions in the Middle East, especially after violent incidents involving the leaders of Hamas and Hezbollah, analysts at Wells Fargo said in a note Monday.
These events, which took place in critical regions such as Tehran and Beirut, have increased the risk of further regional conflict and raised concerns about possible disruptions in global oil supplies, especially through the critical Strait of Hormuz, which supplies about 21% of the world's daily oil. to seek
Historically, political events in the Middle East have been closely linked to increases in oil prices, as markets react to potential oil supply risks. However, the current situation shows a deviation from this pattern.
Oil prices, which have fallen into the mid-$70s per barrel, do not reflect a geopolitical risk premium as they did in previous conflicts. This muted response can be attributed to the protracted nature of the current conflict, where initial fears of supply disruptions have given way to a more measured understanding of the real risks involved.
According to Wells Fargo, at the beginning of such conflicts, oil markets tend to be very sensitive, with prices reacting more to news and fears of possible disruptions. As the conflict continues, however, market sensitivity diminishes as risk becomes more understood and valued.
This lack of empathy is reflected in the current situation, where despite ongoing conflicts, oil prices are stable, reflecting the real balance of global supply and demand without a significant national risk premium.
“However, investors should be aware that the risk of disruption and trade disruption appears to be rising,” analysts said.
Analysts at Wells Fargo warn that while the market is currently underestimating the risks, any further increase could quickly lead to a reversal of the country's risk premium, potentially adding $5-$15 per barrel to oil prices.
