The recent escalation of conflict between Israel and Iran has placed oil at the forefront of market concerns. On Monday morning, oil prices continued to rise as the situation entered its fourth day. Notably, Israel conducted strikes on a natural gas processing facility connected to the South Pars field, leading to significant explosions and production interruptions.
Reports indicate that the focus of these attacks was on Iran’s domestic energy infrastructure rather than its international exports. Despite this, the potential implications for energy security and supply remain significant. On Friday, oil prices experienced their most substantial surge in three years.
Iran, a leading oil producer in OPEC with a crude oil output of around 3.3 million barrels daily, faces potential export losses that could eliminate the anticipated surplus for the fourth quarter. Nevertheless, OPEC possesses a spare capacity of around 5 million barrels per day, which could be brought to market to stabilize prices. The greatest concern is the possibility of strained shipping through the Strait of Hormuz, a critical channel for global oil trade.
Disruptions here could notably impact oil flow from the Persian Gulf and lead to further price increases. In the metals market, gold is witnessing a rise, edging closer to an all-time high thanks to increasing demand amid geopolitical tensions. Prices jumped 1.4% recently, although they remain approximately $50 below the historic peak seen in April.
With the potential for the Middle East conflict to escalate further, new record highs in gold prices seem plausible. Over the year, gold has seen a significant rally of over 30%, influenced by trade policies and central bank demand. On the other hand, the base metals sector, particularly copper, has seen declines spawned by a drop in China’s new home prices and concerns about the property market’s health.
Data released by Chinese authorities indicated both increases in primary aluminium production and declines in crude steel output, illustrating the complexities within the metals market as analysts gauge recovery potential.