Oil prices did not react sharply on Monday after Hezbollah confirmed that its leader was killed in an Israeli airstrike on the Lebanese capital, Beirut, last Friday.
Over the weekend, the Israel Defense Forces reported that Hassan Nasrallah, who led the Iran-backed militant group Hezbollah for more than 30 years, was killed last Friday in a "targeted strike" on the group's headquarters in Beirut.
Hezbollah, known for its violent opposition to Israel and resistance to Western influence in the Middle East, is listed as a terrorist organization by several countries, including the United States and Britain, according to the U.S. director of national intelligence and the London Parliament.
The IDF described Nasrallah as Hezbollah's "central decision-maker" and "strategic leader" and his killing raised concerns about a wider conflict involving Iran.
But the oil market hasn’t seen a big spike. While hostilities have intensified across the Middle East, there haven’t been any oil supply disruptions, said Andy Lipow, president of Lipow Oil Associates.
“The oil market is not anticipating an all-out war between Iran and Israel that would impact supply,” he told CNBC via email.
The Hamas-Israel conflict, which began last year, has had limited impact on the oil market. Lipow explained that the oil market remains under pressure, with stagnant demand in the world's largest oil consumer and increased production in the United States, Canada and Guyana, despite the delay in resuming production cuts by OPEC+.
“The fall of Hezbollah’s leadership could set off a cascade of reactions that would gradually affect oil supply, but since it doesn’t directly impact (oil supply) ... the oil market probably isn’t pricing in much additional risk right now,” said Josh Young, chief information officer at Bison Interests.
However, both experts noted that a rapid escalation of the conflict could lead to crude oil prices reaching $100 per barrel.
Lipow said the biggest risk facing the oil market is the closure of the Strait of Hormuz. He added that while unlikely, if it happened, oil prices would rise by $30 a barrel.
Young also pointed out that "if the situation escalates rapidly, any major disruption to Iranian oil supplies or oil exports through the Strait of Hormuz could send oil prices well above $100 a barrel."
According to the U.S. Energy Information Administration (EIA), the Strait of Hormuz between Oman and Iran is a vital passage through which about one-fifth of global oil production flows every day. It is an important strategic waterway connecting crude oil producers in the Middle East with major oil consuming markets around the world.
After Hamas attacked Israel on October 7 last year, Hezbollah, which supports Hamas, has been fighting fiercely with Israel on the Lebanese-Israeli border. Tens of thousands of people on both sides of the border between Israel and Lebanon have been forced to evacuate their homes.
Article forwarded from: Jinshi Data
