Crude oil prices rise amid geopolitical uncertainty after Iranian President’s death

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on May 20, 2024
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  • Brent crude increased by 41 cents, or 0.5%, reaching $84.39 per barrel by 0632 GMT.
  • Iran & Saudi Arabia are major players in global oil market, collectively influencing global supply dynamics.
  • Any health-related transitions in Saudi leadership might affect the country's oil policies.

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Crude oil prices saw an uptick on Monday due to political instability in major oil-producing countries.

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This follows the tragic death of Iranian President Ebrahim Raisi in a helicopter crash and the cancellation of a planned trip to Japan by Saudi Arabia’s Crown Prince Mohammed bin Salman due to health concerns regarding his father, King Salman.

Brent and WTI crude prices climb

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Brent crude increased by 41 cents, or 0.5%, reaching $84.39 per barrel by 0632 GMT.

 Earlier, it hit $84.43, marking its highest point since May 10. Similarly, U.S. West Texas Intermediate (WTI) crude for June rose by 23 cents to $80.29 per barrel, after peaking at $80.35, the highest since May 1.

The more-active July contract also climbed 31 cents, or 0.4%, to $79.89.

Iranian leadership in crisis

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The unexpected death of Iranian President Ebrahim Raisi has introduced significant uncertainty into the oil markets.

Raisi, a hardliner who was considered a likely successor to Supreme Leader Ayatollah Ali Khamenei, died in a helicopter crash near the Azerbaijan border.

This incident raises questions about the future of Iran’s political landscape and its impact on global oil supplies.

Saudi leadership’s health concerns

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Compounding the geopolitical tension, Saudi Arabia’s Crown Prince Mohammed bin Salman postponed his trip to Japan due to his father, King Salman’s, health issues.

According to Japan’s Chief Cabinet Secretary Yoshimasa Hayashi, King Salman, who is 88 years old, is set to undergo treatment for lung inflammation.

The state news agency confirmed these reports on Sunday, adding another layer of uncertainty to the oil markets.

Market analyst perspectives

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Analysts, including Tony Sycamore from IG Markets, noted that these developments could further drive oil prices upward.

Sycamore highlighted that the uncertainty surrounding King Salman’s health adds to the existing volatility in energy markets following Raisi’s death.

He projected that WTI prices might rebound further toward $83.50, particularly after surpassing the 200-day moving average of $80.02.

Data-driven market analysis

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The correlation between geopolitical events and oil prices is evident. Historical data shows that significant political disruptions in key oil-producing nations tend to trigger price fluctuations.

For instance, during previous periods of instability in the Middle East, Brent and WTI crude prices experienced similar upward movements.

This trend underscores the sensitivity of oil markets to geopolitical shifts.

Impact on global oil supply

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Iran and Saudi Arabia are major players in the global oil market, collectively influencing global supply dynamics. Iran’s political instability and potential changes in leadership could disrupt its oil production and export strategies.

Meanwhile, any health-related transitions in Saudi leadership might affect the country’s oil policies, particularly as it navigates the global energy transition and market stability.

Investor and consumer implications

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Rising oil prices can have broad implications for both investors and consumers.

For investors, the current situation presents potential opportunities in oil futures and related markets. However, it also entails risks associated with heightened volatility.

For consumers, increased oil prices could translate to higher fuel costs, impacting transportation and goods prices, ultimately affecting global economic stability.

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