The commodities market is a wide-ranging and varied one, largely because the different physical products represent different uses. Oil is one of those rare commodities that is an actual consumable item, and due to its nature as a staple raw material for fuel production, combined with its concentration within certain countries that extract and sell it, its value is often intrinsically linked to geopolitical events and economic circumstances.
Currently, Brent Crude Oil is under some degree of observation by analysts and market participants due to its steadily decreasing value which has been consistent for the most part over the past two and a half months since the beginning of the war, which is taking place in the Middle East, a contrary pattern to what may be expected, when ordinarily circumstances like this cause increases.
Historically, oil prices across the board have been dramatically affected by wars involving Israel and its neighbouring countries, largely because many of the OPEC countries which supply oil globally are Middle Eastern nations and members of the Arab League.
For example, in 1973, during the Yom Kippur War, the OPEC nations imposed an oil embargo against the United States in an attempt to reverse the decision by the US government to supply weapons and funding to the Israel Defense Forces, resulting in fuel rationing and the imposition of a 55 miles per hour speed limit, as well as spiralling oil prices.
Despite the discourse from many OPEC countries relating to the current political situation and the escalation of war between Israel and the Gaza Strip, the price of Brent Crude Oil has actually decreased over recent days. During these recent days, there has been further escalation to the extent that other surrounding nations may begin a campaign against Israel.
On December 26, Brent Crude Oil was trading at $80.50 per barrel at FXOpen; however, by the next day, it returned to below the $80 per barrel mark and hit $79.15 at FXOpen at the end of trading yesterday before a slight rebound in the very early hours of the morning to $79.52 at FXOpen.
This is very different from the trajectory of crude oil values two years ago when the conflict in Ukraine intensified, and oil prices rose rapidly. In March 2022, Brent Crude was trading at over $125 per barrel, for example.
Currently, with Iran and Saudi Arabia taking a very dim view of Israeli operations in Gaza and the US not backing any calls for a ceasefire, it is an unknown possibility that these strong OPEC nations could resort to oil embargoes against the US and its allies as leverage. If this were to be the case, an upward surge in oil prices would be inevitable.
This has not been discussed by any nation. However, the current relatively stagnant price of oil in times like this is certainly an interesting dynamic to follow.
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