Early on Saturday, the 7th of October, Israel suffered a heavy and unexpected military assault from Hamas, a Palestinian-based Islamist militant group, triggering a wave of retaliatory Israeli air strikes on the Gaza Strip. The battle- intricately interwoven with geo-political, economic and religious undertones- has recorded the loss of hundreds of lives on both sides while stalling economic activities in both warring economies.
Like the Russian-Ukraine War, this conflict in the Middle East is slowly and steadily impacting the global economy, invariably threatening the economic growth of developing countries in sub-Saharan Africa. A crucial example is the impact it’s had on global oil prices.
The global crude oil prices surged almost 5% in trading on Monday, on the heels of the conflict in the Middle East, reversing some of the significant declines in recent weeks. As of Friday, 6th of October, Oil prices fell by about 9%, to trade at $84.08 per barrel (Brent) and $82.40 a barrel (WTI), respectively. That was its fastest weekly drop of the last seven months caused by global triggers like a strong dollar, Russia’s decision to ease the diesel export ban, the resumption of the Iraq-Türkiye crude oil pipeline, etc.
But between the 7th and 10th of October, oil prices rose to $87.86 (Brent) and $86.19 (WTI), a 4% increase due to concerns that the Israel-Hamas war could embroil the wider petroleum-producing Gulf region and threaten global output. Reuters reported that up to 3% of the global oil supply is at risk if the conflict envelopes Iran. More so, Pierre Andurand, French Businessman and Hedge Fund manager tweeted on X (formerly Twitter) that over the last 6 months, there was a substantial increase in the Iranian supply of oil due to weak enforcement of sanctions by the United States. “As Iran is also behind Hamas’ attacks on Israel, there is a good probability that the US administration will start enforcing those sanctions on Iranian oil exports more tightly. That would further tighten the oil market,” he wrote.
These events could trigger an increase in the global price of petroleum products, a considerable threat to the standard of living for people in Africa. Most of these economies heavily rely on petroleum products for transportation and electricity that powers up generators for homes, factories and other official uses. As the war lingers and gains support from the rest of the Middle East- a region responsible for almost a third of the global oil supply- emerging markets may soon start experiencing energy supply cuts. That would invariably trigger a high cost of living.
