Oil prices climb back up on Mideast tensions, Russian sanctions - Yahoo Finance

Oil prices climb back up on Mideast tensions, Russian sanctions

Geopolitical headlines, including the escalating conflict between Israel and Hamas forces and the United States' sanctions imposed on Russian oil, are pushing oil prices higher. Yahoo Finance Senior Reporter Ines Ferre examines energy market trends, including how Iran is upping its oil production.

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Video Transcript

SEANA SMITH: Oil prices spiking higher today, up nearly 4%. A couple of things going on. One, conflict in the Middle East. Exactly how that's going to play out following Israel's calling for the evacuation of over a million people from Gaza. That is driving oil prices to the upside as well as new sanctions here on US crude exports raising some supply concerns in what is already a very tight market. So here for more on what this means for energy prices, we want to bring in Ines Ferre. Ines.

INES FERRE: Yeah, Seana. And let me start out with that second point that you just touched on, those price caps that the G7, the coalition that includes the US, Japan, France, Germany, et cetera, some other countries, as well as Australia, that price-- those price caps were put in place against Russian oil exports last year.

And basically what it says is that vessels cannot carry Russian oil that is above $60 per barrel. So that price cap is intended to restrict the funding for Russia, that funding that would be presumably going towards the war in Ukraine.

Now, the US and the other countries within the G7 have said that they-- that there are two companies that have vessels that were carrying Russian oil that was priced above $75 a barrel and $80 a barrel. So basically a crackdown on those companies and companies that were violating that price cap

The US here is seen as cracking down on Russian oil. And that is putting the US though and others in a precarious situation because, of course, when you're taking out supply from the market, that's difficult when you have seen prices go up high, so which brings me to my next point.

Going into this weekend, a lot of uncertainty, of course, the counter attack by Israel against Hamas in Gaza. That is widely expected. But there's uncertainty around the conflict. And namely, there has been uncertainty this week on whether or not Iran, which is a known ally of Hamas was involved in any way against the attacks on Israel.

Now, interestingly, Iran recently said that it has increased its oil production from about 2 million barrels per day back in 2020 to 3.2 million barrels per day today. And the US has basically turned a blind eye around this issue.

Now, Andy Lipow of Lipow Oil Associates is saying to me that, look, the US can't afford to take oil supplies off of the market because that is going to result in higher gasoline prices. And we are going into an election year next year.

So a lot of uncertainty in the market. And what we have seen with oil this week, the spike we saw on Monday was around the Israeli-Hamas war broadening to other countries, namely to Iran, and what that would do to the oil market.

BRAD SMITH: Ines, how quickly do we typically see a pass through to gasoline prices? We're taking a look at futures and the move here today largely mirroring what we're seeing in the oils market-- in the oil market and energy prices here. But how soon typically is there a pass through to what people are paying at the pump?

INES FERRE: Yeah, look, that saying goes that prices go up like a rocket, they come down like a feather. So you could see price increases relatively quickly, especially because Iran is-- especially because Iran is a player here in the oil market-- world oil market.

You also have the Strait of Hormuz that if that were to by any-- be impacted in any way, you would see oil prices shoot up. And that would have a significant impact on gasoline prices relatively soon. I wouldn't say that you'd see that tomorrow. But you would see that within the next couple of weeks.

Again, this is a thorny issue for the administration. These oil-- these gas prices, they have been coming down. We have had analysts that have been saying that you would see them come down significantly. But this just throws a wrench into the situation.

BRAD SMITH: All right, Ines, thanks so much for continuing to cover the space for us and bringing us updates here. Appreciate it.