Source: Alamy

Instability in the Middle East often means trouble for global energy markets

An escalation in the Israel-Hamas conflict could push energy and fertiliser prices up further and lead to costlier food production.

Crude oil and natural gas prices, which have steadily climbed for months, have risen further since the attack from militant group Hamas on Israel on 7 October.

Mintec industrial analyst Artem Segen said the threat of violence spilling into neighbouring countries would likely mean a greater increase in commodity costs.

“The future scale of the conflict is not clear,” Segen said. However, “if the scale of the conflict expands and affects the Persian Gulf countries, it will certainly lead to an increase in energy prices”.

Both oil and gas prices are closely linked with food production costs, particularly in areas like vegetable oils and baking, and more broadly through fuel and fertiliser.

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And while Israel is not a big oil producer, any form of instability in the Middle East often means turbulence on energy markets as several of its surrounding countries are central to global oil and gas production.

Food commodity markets are also keeping an eye on fertiliser, which is an important export from Israel.

Prices in the EU have remained stable in the past week as there have been no announcements from Israel about stopping deliveries.

But “if the conflict drags on, fertiliser prices could rise in winter/early spring on the back of increased demand and if the conflict continues”, Segen said.

Any escalation of the war between Hamas and Israel could also lead to a shift in global supply chains and commodity flows “as we see with Russia, which redirected exports of hydrocarbons, steel and metals to the Asian market after the start of the war in Ukraine”, Segen said.