These are the Middle East Conflicts that Rocked the Global Oil Market

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Adi Ahdiat 31/10/2023 19:02 WIB

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According to the World Bank, conflicts involving oil-producing countries in the Middle East frequently disrupt the global oil supply, leading to oil price spikes.

Global Crude Oil Supply Volume Lost Due to Middle East Conflicts (1973-1990)

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Global Crude Oil Supply Volume Lost Due to Middle East Conflicts (1973-1990)

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Conflicts involving oil-producing countries in the Middle East frequently affect the stability of the global crude oil market. This was revealed by the World Bank in its October 2023 edition of the *Commodity Markets Outlook* report.

"Various geopolitical events in the Middle East since the early 1970s, often marked by military conflicts, have impacted global oil supply, resulting in oil price spikes and increased volatility," stated the World Bank in its report.

According to the World Bank, the first Middle Eastern conflict to shake the global oil market was the 1973 Yom Kippur War.

At that time, Israel fought against Arab nations led by Egypt and Syria. Arab nations then imposed an embargo, prohibiting oil trade with countries supporting Israel.

"The Arab oil embargo (during the Yom Kippur War), which lasted from October 1973 to March 1974, resulted in the removal of 4.3 million barrels of oil per day from the market, equivalent to 7.5% of global supply," said the World Bank.

"During the embargo, OPEC (the Organization of the Petroleum Exporting Countries) raised oil prices from US$2.7 per barrel in September 1973 to US$13 per barrel in January 1974. Although the embargo lasted only five months, real oil prices remained high and never returned to pre-embargo levels," it continued.

The World Bank noted that the economic shock from the embargo was severe, causing a surge in global inflation and triggering the 1975 global recession.

Following the Yom Kippur War, the oil market was again disrupted in late 1978 by the Iranian Revolution, involving conflict between forces supporting the monarchy and the Islamic Republic in Iran.

According to the World Bank, during the revolution, the global market lost approximately 5.6 million barrels of oil per day in supply.

"This event (the Iranian Revolution) caused oil prices to more than double. The sharp price increase triggered a decline in oil demand, a reduction in global economic activity, and contributed to increased global inflation," said the World Bank.

A similar situation occurred in 1980 when the Iran-Iraq war erupted, resulting in a loss of 4.1 million barrels of oil per day from the global supply.

Then, in 1990, when Iraq invaded Kuwait, the global supply lost reached 4.3 million barrels of oil per day.

Since then, several other conflicts in the Middle East have affected global oil supply, such as the Libyan civil war in 2011, the attacks on Saudi Arabian oil facilities in 2019, and the imposition of US sanctions against Iran.

However, according to the World Bank, the impact of Middle Eastern conflicts that emerged after the 2000s has been milder than that of previous conflicts.

"Market conditions are now very different. The global economy is less reliant on oil; oil suppliers are more diversified; some countries have strategic oil reserves; futures markets aid in price discovery; and the IEA (International Energy Agency) helps formulate responses to energy price shocks," said the World Bank.

"With these factors in place, the impact of recent escalations of conflict in the Middle East will be more moderate than in the past," it continued.

Editor : Adi Ahdiat

"Disclosure: This is an AI-generated translation of the original article. We strive for accuracy, but please note that automated translations may contain errors or slight inconsistencies."

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These are the Middle East Conflicts that Rocked the Global Oil Market

These are the Middle East Conflicts that Rocked the Global Oil Market

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