Asia on edge over oil supply risk as Israel-Gaza conflict threatens to spread to Middle East
- Heightened tensions could affect passage of tankers, inflate insurance and transport costs, with debt-strapped nations likely to be hit the hardest, analysts say
- The direction of oil prices will also depend on whether Iran gets pulled into the conflict, with US sanctions likely to hit Iranian oil production
Iran has called for Muslim countries to carry out an immediate boycott of Israel, including an oil embargo. However, the bigger worry is that the tensions could affect the passage of tankers through the Strait of Hormuz in the Persian Gulf, through which up to a third of global supplies are routed.
“If crude oil prices stay above US$90 per barrel for more than two weeks, then it will create pressure points for the whole world,” said Madan Sabnavis, chief economist for India’s Bank of Baroda, adding that debt-strapped nations would be hit the hardest.
China, India and most Asian nations are dependent on oil imports. Officials in these nations are likely to be closely monitoring how Arab nations, who appear to be aligned with Palestine, react to the developments following the attack. India and China have been buying discounted Russian oil and the tensions in the Middle East mean that is likely to continue.
Heightened tensions could inflate insurance and transport costs for oil tankers, Sabnavis said.
05:14
Hundreds killed in Gaza hospital blast, Israel and Hamas trade blame
On Wednesday, the US said its assessment showed that Israel was not responsible for the explosion that killed hundreds of civilians at the Al Ahli Hospital in the Gaza Strip.
