New Winds of War in the Middle East – Oil Prices Rise Again

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In the Middle East, Israeli Foreign Minister Israel Katz has long warned of a possible “all-out war” with Lebanese Hezbollah, even as the United States tries to avoid a broader conflict between Israel and the Iranian-backed group.

The countdown to an Israeli response to Hezbollah has now begun, after Biden’s Middle East plenipotentiary, Amos Hochstein, made clear yesterday that attempts to reach a deal on Israel’s northern border and avoid war have failed.

Let’s remember that Hochstein is a negotiator at the highest levels, the man who blocked South Stream and Nord Stream 2, the gas pipelines that would have permanently made Europe a slave to Russian gas.

The risk of the conflict widening is very strong, because Cyprus, which has been threatened by Nasrallah, supreme leader of Hezbollah, is also involved.

The Israeli military has recently used ports and airports in Cyprus for military exercises, which is why Cyprus is considered a target of Hezbollah.

The Cypriot ambassador to Israel has said he will not be intimidated by Hezbollah and promises a response to their threats. We remind you that Cyprus is to all intents and purposes a country of the European Union.

The situation has really worsened in recent days, as confirmed by the fact that the US aircraft carrier Gerald Ford and its accompanying fleet are on their way to the coast of Haifa, in northern Israel.

Biden cannot afford a weak response if the conflict spreads to Lebanon, because he would be completely abandoned by the Jewish community in the USA, which traditionally votes for the Democratic Party.

The Recovery in Oil Prices is Anticipating the Conflict

In this scenario, oil prices reached seven-week highs yesterday, driven essentially by two factors.

First, optimism about summer demand, the so-called U.S. gasoline season and, second, concerns about escalating conflict in the Middle East offset an industry report that U.S. crude inventories have increased unexpectedly.

Brent crude futures gained 23 cents, or 0.3%, to $85.56 a barrel, while U.S. West Texas Intermediate crude rose 18 cents, or 0.2%, to $81.75 per barrel.

Both benchmarks, having made strong recoveries over the past two weeks, gained more than $1 in the previous session, hitting seven-week highs after a Ukrainian drone attack caused a fire at an oil terminal at a major port Russian.

An escalating war risks disrupting supplies in the main oil-producing region.

This comes despite doubts about final demand for goods, as Chinese data this week showed May industrial production fell short of expectations.

However, retail sales, a gauge of consumption, posted the fastest growth since February. U.S. crude oil inventories increased by 2.264 million barrels in the week ended June 14. Unexpectedly, on the eve of the gasoline season, fuel inventories decreased by 1.077 million barrels, while distillates increased by 538,000 barrels.

Our Advice

With rising geopolitical tensions and the resulting rise in oil prices, it is important for investors to monitor the situation closely. Here are some tips:

Diversification: Maintain a diversified portfolio to mitigate risks associated with oil market fluctuations.
Continuous Analysis: Keep an eye on geopolitical developments and official announcements from government bodies and oil companies.
Investments in Renewable Energy: Consider including renewable energy in your portfolio to balance exposure to fossil fuels.
Professional Consulting: Consult financial experts to adapt your investment strategy to changing market conditions.

That’s why we are here…

Flavio Ferrara – Independent Financial Advisoris here to help people invest consciously, starting from what we know we don’t know and using simple, calm and engaging language.