What explains a calm oil market as the war in West Asia escalates?
Subscribe to enjoy similar stories. The war in West Asia has intensified. With its Gaza operations against Hamas not yet over, Israel has aimed its firepower at Hezbollah, an Iran-backed militia based in Lebanon to its north.
A wave of pager and walkie-talkie explosions last week rattled the militia’s ranks, took lives, injured many and heralded a cross-border exchange of lethal projectiles that has taken an even larger toll, with hundreds reported killed by Israeli action this week. It looks like an attempt by Tel Aviv to neutralize a threat before the US pushes for restraint. These hostilities raise the risk of a flare-up that may draw Tehran directly into battle, even as sea trade routes face Houthi attacks, the Russia-Ukraine war shows no sign of abating and China is seen to be upping the ante in global geopolitics.
Despite all this, the global market for crude oil has retained its composure. Having stayed in a relatively soft zone of around $75 per barrel for months, oil has barely budged since the weekend, with a small gain reported on Tuesday in response to China’s policy stimulus that may firm up demand, coupled with West Asia’s woes and a US hurricane alert that could disrupt supply. That another theatre of war opened by Israel has had such a mild impact reveals the power held by the balance of demand and supply.
Consider the scenario. China’s economic slowdown has kept demand weak, and even though it is trying hard to effect a revival, the pace of its move away from fossil fuels could mean it’s unlikely to be the voracious oil guzzler that exporters would like it to be. Sure, the rising use of hydrocarbons in other big markets—including America and India—has held up global oil consumption, with 2024 set to
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