The crude oil markets had a rocky start on Monday,
perhaps owing to a range of unexpected global developments.
At the top of the list was the drone attack, attributed
to Iran, on an Israeli-registered tanker off the coast of Oman. The serious
attack that led to the death of the captain and a British security officer
created a palpable tension in the volatile region, just less than a week away for
the inauguration of the new Iranian president.
The US, UK and Israel now say in unison that Iran is
responsible for the attack. The US warned that there would be an appropriate response
in the coming days, leaving the nature of it open to speculation.
In addition, Israel vowed to deal with its own way;
it did not specify or hint what form that response would be, either.
Military analysts believe the response may be beyond
imposing new sanctions; a military response, on the other hand, has the
potential to escalate the crisis and even bring in more shadowy actors into the
conflict arena.
Whatever the form that the threatened response is
going take of, the crude oil supply through the Strait of Hormuz is going to be
affected in the event of a conflict breaking out, regardless of its duration
and intensity; it’s an irony that Iran has already made a new terminal for its
oil exports, away from the busy passage for global supply of the commodity.
In these circumstances, the anticipated reaction
from the crude oil markets is an upward trend in the price of oil. The price of
the commodity, however, substantially went down in the early trades: at 11:50
GMT, WTI and Brent lost their values by 1.61% and 1.31% respectively.
That means, the investor-worries go beyond the
Middle Eastern tension.
The growth of China appears to be a major concern:
the anticipated, steady growth has not materialised and the outbreak of the
Delta variant in two major cities has cast a gloomy shadow over China’s ability
to weather the Covid-19 storm unscathed; crude oil imports from China has already
suffered due to evolving realities.
The indisputable evidence that the new variants of
the Coronavirus still have the potential to disrupt the economic activities across
the globe has spooked the investors. In these circumstances, one thing that the
investors in the sector do not want to hear is yet another conflict breaking out
in the Middle East.
