Bank of England releases oil rate shock caution
Date
10/6/2024 8:26:36 AM
(MENAFN) The ongoing conflict between Iran and Israel has raised alarms about the possibility of a significant energy crisis reminiscent of the 1970s, according to bank of England Governor Andrew Bailey. In an interview with the Guardian, Bailey expressed concerns that escalating tensions in the region could leave the global Economy exposed to severe shocks in oil prices.
His warning comes in the wake of Israel’s recent military actions in southern Lebanon and Iran’s retaliatory missile strikes against Israel. This surge in hostilities has already triggered a notable increase in oil prices, with brent crude futures for December delivery rising 1.91 percent to USD75.31 per barrel, and U.S. West Texas Intermediate (WTI) crude for November climbing 2.21 percent to USD71.65 per barrel as of 13:25 GMT.
Bailey remarked on the seriousness of the geopolitical situation, emphasizing that the central bank is closely monitoring developments. “It’s tragic what’s going on,” he noted, acknowledging the stresses resulting from the conflict. He added that the real concern lies in how these tensions might affect already strained markets.
Furthermore, Bailey indicated that there are limits to the measures the central bank can take to curb rising oil prices if the situation deteriorates significantly. Analysts echo his sentiments, pointing out that the potential for a wider conflict in the Middle East threatens to disrupt oil flows, overshadowing what had been a more positive global supply outlook.
While there has been a brief period of calm returning to global markets following initial reactions to geopolitical risks, market participants remain wary and vigilant. As IG market strategist Yeap Jun Rong noted, there is ongoing speculation regarding Israel’s response to the situation, which continues to keep a cloud of uncertainty over the oil market.
The ramifications of these tensions extend beyond immediate price increases; they could also impact broader economic stability, underscoring the interconnectedness of geopolitical events and global energy markets. As the situation unfolds, both investors and consumers will be watching closely to see how these developments may shape the energy landscape in the coming months.
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