Why Global Oil and Gas Prices Remained Largely Unchanged During the Israel-Iran War

It was expected that the military conflict between Iran and Israel would cause global oil and gas prices to skyrocket. However, after 12 days of drone and missile strikes between the warring parties, compounded by U.S. strikes on key nuclear sites in Iran, oil and gas prices on the global market are lower than the levels at which they were prior to the confrontation. What could explain this anomaly?

The output of shale oil and gas in the United States is one key reason to explain why the market has generally remained stable despite the boiling conflict in the Middle East. The output from the U.S. has provided needed diversification of supply sources, so countries that would have suffered if production in the Middle East is hampered are assured that America can increase its production if the need arises. This supply buffer has calmed markets and had a beneficial effect upon prices.

Talking of spare capacity, OPEC member states like Iraq, the United Arab Emirates and Saudi Arabia have extra production capacity that isn’t being utilized. In the event that extra output is needed as a result of the conflict between Israel and Iran, these Arab countries can gladly step in to produce as much oil and gas as the market requires. This redundant capacity in countries close to Iran has helped to prevent the global market from overreacting to the outbreak of war between Israel and Iran.

It is one thing for oil to be produced in the Middle East and a totally different matter for that oil to reach where it needs to go. The Strait of Hormuz is a major transport corridor for oil and gas from the Middle East, and major concerns have lingered regarding possible shocks to the market if Iran closes this vital transit route. However, markets have remained calm because the UAE and Saudi Arabia have expanded or built pipelines which don’t go through the Strait of Hormuz. In other words, if Iran closed the strait, there are workarounds that would still get needed oil and gas to the market.

Ironically, the final factor we will discuss here has to do with the previous threats that Iran has made that it would close the strait. Each time there has been a threat to the country, Iran has quickly threatened to close the strait and nothing has happened. In Texas, they would describe Iran as “all hat, but no cattle.” Big talk, no action. Iran has repeated its threat so many times and done nothing, so the world has learned to ignore its threat. Those who cry wolf when no such wolf is close by eventually get eaten by a wolf as their cries for help are ignored.

For now, oil and gas markets are carrying on as though the Middle East didn’t flare up in military confrontation. However, entities like GEMXX Corp. (OTC: GEMZ) are probably studying the Middle East situation closely in order to identify vital lessons that they can factor into their planning and operations.

NOTE TO INVESTORS: The latest news and updates relating to GEMXX Corp. (OTC: GEMZ) are available in the company’s newsroom at https://ibn.fm/GEMZ

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