Unusual Resilience of Oil Market in the Face of Escalating Tensions: The Case of Israel and Iran

The recent exchange of blows between Israel and Iran has sparked heated discussions, but surprisingly had little impact on the oil market. Despite Iran’s increased exports, tensions escalated after Iran’s attack on Israel last weekend, followed by a retaliatory action from Israel. However, oil prices remained stable, with North Sea Brent oil seeing minimal fluctuations. Market analysts believe that all parties involved are not interested in prolonging the conflict, and the attacks are primarily to avoid appearing weak.

Political risk in the region has already been factored into the rising oil prices seen in recent weeks and months. Despite the escalating tensions, oil supply has not been significantly affected. Iran’s exports of crude oil and condensates have increased, reaching levels not seen in years despite US sanctions. The absence of the word “oil” in new US and EU sanctions against Iran indicates a focus on limiting revenue without major disruptions in oil supply.

Iran’s ability to bypass sanctions and increase exports is attributed to advancements in their fleet of oil tankers. The expansion of their tanker fleet and utilization of creative methods to circumvent sanctions have allowed Iran to boost its oil exports. While the discussion around imposing stricter sanctions continues, targeting Chinese financial institutions poses risks to the delicate US-China relationship.

The increase in floating oil storage indicates Iran’s capability to meet demand, especially in China, despite geographical limitations. With Iranian oil prices likely lower than the world market price due to its quality and constraints, the discussion around sanctions and their effectiveness remains ongoing.

In conclusion, while political tensions between Israel and Iran may have caused some concern among investors regarding global stability, they have not significantly impacted the oil market. Instead, it appears that all parties involved are focused on maintaining export strength while avoiding disrupting supply chains or causing further tension with other countries or financial institutions.