Fifty years ago, there was also a Middle East war, followed by the "oil crisis".

On October 7th, a large-scale conflict between Israel and Palestine broke out again.

According to Xinhua News, at around 7 am local time on the 7th, Hamas began to intensively launch rockets at Israel, and its armed personnel entered Israeli territory under the cover of rockets to carry out military operations. Hamas claimed to have launched at least 5,000 rockets into Israel. Air raid sirens sounded in multiple areas in the southern and central parts of Israel. Israel subsequently carried out airstrikes in the Gaza Strip.

History will not repeat itself, but it always rhymes.

Fifty years ago, a Middle East war broke out, followed by the famous "First Oil Crisis"--

On October 6, 1973, the Fourth Middle East War broke out. On October 14, the United States openly airlifted weapons to Israel, and on the 19th, provided $2.2 billion in military aid to Israel. Arab countries then implemented a series of production cuts and oil embargoes, pushing the oil crisis to its climax.

Analysts believe that although the timing of the outbreak of the conflict is very coincidental, this conflict is likely to become a "bloody assist" to oil prices, but compared with the first oil crisis, the current situation is very different:

Currently, Arab countries are not "united" in their efforts. Egypt, Jordan, Syria, Saudi Arabia, and other Arab countries are still onlookers... The global economy will not suffer another oil embargo from Arab countries.

However, the situation is changing rapidly, and for the oil market, everything depends on how Israel responds to the Hamas attacks, whether it publicly accuses Iran of being responsible for the attacks, and whether the conflict will continue to escalate.

For investors, it is not a correct choice to downplay the possibility of a long-term increase in world oil prices.

Earlier today, media columnist Javier Blas discussed several preliminary conclusions on the impact of the Israel-Palestine conflict on international oil prices. He believes:

"Crude oil prices may rise, but there is still a lot of production capacity available."

The specific conclusions are as follows:

1. This crisis is not a replay of the "First Oil Crisis" in October 1973.

The reason is that currently, Arab countries are not "united" in their "attack" on Israel. Egypt, Jordan, Syria, Saudi Arabia, and other Arab countries are still onlookers, not "players".

1. The international oil market itself does not have any characteristics before October 1973.

Blas believes that at that time, oil demand was growing rapidly, and the world had exhausted all spare production capacity. Today, consumption growth has slowed down, and with the emergence of electric vehicles, oil consumption growth may further slow down. In addition, Saudi Arabia and the United Arab Emirates still have a large amount of spare production capacity that can be used to stabilize prices, provided that they are willing to do so.

1. Equally important, OPEC countries are not trying to push prices too high now.

Blas wrote that Riyadh would be satisfied with a 10-20% increase in oil prices, from the current slightly above $85 per barrel to over $100 per barrel, instead of pushing it up by more than 100% to $200 per barrel. 4. The crisis may still have an impact on the oil market in 2023 and 2024.

Blas believes that if Israel concludes that Iran is responsible for the attacks by Hamas, oil prices could rise significantly. If Iran finds itself under attack by Israel or the United States, it may take retaliatory measures.

5. Even if Israel does not take immediate action against Iran, Iran's oil production may still be affected.

Blas said:

Since the end of 2022, Washington has turned a blind eye to the surge in Iran's oil exports. At that time, Washington's priority was to ease relations with Iran and initiate informal negotiations.

As a result, Iran's oil production has increased by nearly 700,000 barrels per day this year, becoming the second largest incremental supply source in 2023, second only to US shale oil. And now, the White House may reimpose sanctions, which could push oil prices up to $100 per barrel or even higher.

6. Blas also believes that some sanctioned oil-producing countries may benefit from this.

7. The normalization of Saudi-Israeli relations planned by the United States may become a "sacrifice".

Blas wrote:

Many people expect that a diplomatic agreement between Saudi Arabia and Israel will be reached in early or mid-2024, but this conflict may make it a sacrifice.

Even if Riyadh may be angry with Hamas, it is difficult to see how Crown Prince Salman can push for an agreement domestically. This further weakens the possibility of Saudi Arabia increasing production to help Washington approve the agreement.

In addition, the conflict may further promote reconciliation between Saudi Arabia and Iran, which is another unfavorable factor for the oil market.

8. Unlike in 1973, Washington now has the ability to use strategic oil reserves to regulate international crude oil prices.

Blas wrote:

There is an important difference from 1973, that is, Washington can use its strategic oil reserves to influence oil prices, as well as the approval rating of President Joe Biden.

If the tension in the Middle East causes oil prices to soar, the White House will definitely use strategic oil reserves. Although the reserves have fallen to the lowest level in 40 years, there is still enough oil reserves to deal with another crisis.