Geopolitical Instability and Oil Markets

The recent attack by Hamas on Israeli targets and the subsequent declaration of war has led to geopolitical instability in the Middle East. While neither Gaza nor Israel have significant oil production, the region's instability can have wide-ranging effects on the oil markets. Historical events like the Yom Kippur War in 1973, where Saudi Arabia imposed oil embargoes, show that oil prices can be affected by conflicts in the region. Tighter sanctions on Iran, one of the largest oil producers in the Middle East, could further constrict oil supply. The stock market has also responded to the war, with defense companies' stocks surging while major US indices experienced declines.