Conflict in Middle East could push oil prices higher: analyst

Economists have warned that a widespread and prolonged conflict in the Middle East could lead to a surge in global oil prices, following U.S. and Israeli attacks on Iran, and retaliatory Iranian missile attacks on targets in countries across the region.

In an interview with China Global Television Network (CGTN), Claudio Galimberti, chief economist at Oslo-based research firm Rystad Energy, said the heightened tensions in the Middle East, triggered by the joint U.S.-Israeli strike on Iran on Saturday, could impact international oil markets in the period ahead.

"What we have watched is the particular dynamic on Brent, on other oil complex and on the commodities in general. What we have seen is that Brent opened around 82 dollars per barrel in the initial minutes, then it started to drop towards 78. Currently it is trading about 76, which is 4 or 5 U.S. dollars more than the close that we had on Friday. So, this means that we have an increase right now in price between five and eight percent. So, it's probably less than what people expected, considering that so far, the Strait of Hormuz has been under a blockade," said Galimberti.

He said that the conflict is likely to reset the logic behind oil pricing.

"There was an increase in prices that was driven primarily by the price risk premium. So, the expectation that things in the Middle East were coming to a confrontation. And also, the fact that in Russia, the war between Ukraine and Russia was going on and keeps going on. That puts quite a lot of supply at risk, and the market is pricing that risk. The situation in the Middle East is far from resolved, right? So, these are early days. As a matter of fact, the Trump Administration said that the conflict can go on for even weeks. If that is the case, then we would see an immediate repricing of all the risk," said Galimberti.

"If in the next few weeks, the Strait is blockaded then, for sure, there's going to be a very quick repricing of the risk and prices will start to climb again," he added.

Conflict in Middle East could push oil prices higher: analyst

China is calling for an immediate cessation of the U.S.-Israeli attacks on Iran and joint efforts to oppose such unilateral actions, the Chinese envoy to the International Atomic Energy Agency (IAEA) said on Monday.

Li Song, China's permanent representative to the IAEA, said that military strikes against Iran, launched by the United States and Israel, have led to a sudden escalation of an already volatile situation in the Middle East.

Li said the attacks launched as the U.S. and Iran were in the midst of negotiations were unacceptable, as was the blatant killing of a sovereign leader and the incitement of regime change. China firmly opposes and strongly condemns such unilateral acts, Li said.

Li said that China respects Iran's legitimate right to the peaceful use of nuclear energy, and attaches great importance to Iran's repeated reaffirmations that it has no intention of developing nuclear weapons. He also highlighted a report released by IAEA Director General Rafael Grossi, which stated that no evidence of Iran developing nuclear weapons had been found.

Peacefully resolving the Iranian nuclear issue through political and diplomatic means is the only correct option and is in the common interest of the international community, Li said.

Chinese IAEA envoy calls for cessation of US-Israeli attacks on Iran