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Renewed escalation of conflict in the Middle East has once again sent global concerns about energy supply soaring. As a direct consequence, Brent crude oil prices have surged to $100 per barrel in the international market. This marks the first time since May that fuel oil prices have touched this significant milestone.
On Thursday, following the US’s intensification of military operations against Iran, Brent crude prices surged by over 6% in a single day, continuing several days of upward trends.
According to analysts, the situation became even more volatile after Iranian-backed Houthi rebels in Yemen attacked oil tankers in the Red Sea. This has placed Saudi Arabia’s alternative and crucial export route, used to bypass the Strait of Hormuz, at extreme risk.
Not just oil, but natural gas prices are also rising rapidly. In the UK, the benchmark gas price currently stands at approximately 150 pence per therm, a significant increase from around 98 pence in late June.
Previously, oil prices had somewhat decreased during a temporary ceasefire between the US and Iran. They even dropped to levels seen before the joint US-Israeli military operation in Iran began on February 28. However, with the breakdown of that ceasefire, the scenario has completely shifted once again.
This week, US Secretary of State Marco Rubio stated that Iran’s current leadership is not yet prepared to reach any form of understanding or agreement.
Inflation and Looming Concerns for the Global Economy
Economists fear that the ongoing military conflict in the Middle East could significantly exacerbate inflationary pressures worldwide. A rise in oil prices naturally leads to higher petrol and diesel costs, subsequently increasing overall transportation expenses and creating a risk of price hikes for all essential commodities, including food.
Developed countries are already experiencing its effects.
United Kingdom
Over the past two and a half weeks, the average price of petrol in the country has risen by approximately 5 pence, reaching £1.56 per liter. During the same period, the average diesel price increased to £1.72 per liter.
United States
In the US, the average price of gasoline per gallon has again surpassed $4, up from $3.92 just a month ago.
Central Bank Policy and Trump’s Stance
Amidst global economic uncertainty, Kevin Warsh, Chairman of the US central bank ‘Federal Reserve’, clearly stated to Congress that prolonged high inflation would not be tolerated. Despite increased global inflation risks due to the severe conflict in the Middle East, the Fed remains fully committed to restoring price stability.
Although US President Donald Trump has advocated for lowering interest rates to ensure commercial advantages, the Fed remains steadfast in its policy decisions. In the first meeting chaired by Kevin Warsh last month, the Fed did not cut interest rates; instead, they were kept unchanged within the range of 3.5% to 3.75%.
Sources: The Guardian, The New York Times.