The never-ending volatility in the Middle East took yet another turn for the worse this week, when the Druze community in Syria came under attack from some sections of the Bedouin tribes in Syria; the closer relations of the former with the state of Israel made an already tense situation even worse that almost bordered on a full-blown conflict, dragging another keyplayer in the region, Turkey, into it.
When Druze community leaders begged of Israel for help, the Jewish state sprang into action with what it is usually good at - launching relentless airstrikes; it even hit the Ministry of Defence in Damascus, the Syrian capital. The US did not seem to approve of the heavy military approach by the Jewish state, despite the Druze community was at risk of being attack or in the worst case scenario being overwhelmed by the sheer number of its heavily-armed, determined enemies.
At last, however, sanity prevailed: as the week wore on, however, a US-brokered ceasefire started holding, although skirmishes from both sides still remain. The Syrian government, however, is confident that its troops can keep the warring parties apart for the foreseeable future. It, perhaps, knows the risk of letting it be otherwise, after decades of fighting in the country.
Surprisingly, the latest conflict did not cause a spike in oil prices, although analysts anticipated it: on one hand, it shows that energy markets are somewhat weary of the conflicts in the region; on the other hand, there is a vociferous leader in the White House who could shout from the rooftop, if the prices go up steeply or are inflated by hype and misplaced sentiment; the oil companies can ill afford a series of social media posts in all-caps from the world's most powerful man, who never shies away from expressing his views - controversial or not.
With the OPEC+ breaking its own self-imposed covenant - cutting down on the oil production to 'stabilize' the markets - and increasing output from the non-OPEC+ nations such as the United States, Guyana and Brazil, the markets seem to be having an ample supply of the commodity for the traders to move on cautiously. In addition, the US crude stocks - a crucial indicator that determines the optimism in the oil markets - remain high despite the onset of summer driving season.
In another development, Slovakia, an EU member with strong ties with Russia, agreed to lift the veto over banning Russian oil and gas imports to the member nations of the bloc on condition that the energy security of the former would be addressed. Both Hungary and Slovakia used to vehemently oppose severing the ties with Russia when it came to importing the vital Russian commodities - oil and gas - on the ground of their energy need being at stake. Analysts believe that it may result in an increase in oil price, something remains to be seen.
The OPEC+, meanwhile, implies that its members do not want to lose its share of the markets by squeezing the output in order to shore up the struggling oil prices. It never worked in the past; nor will it make any difference in the future. OPEC+ has come to the understanding that the impact on oil production by Net Zero guidelines is gradually diminishing due to openly-hostile approach by the Trump Administration as if it was a hoax.
The other factor that analysts keep an eye on is the Strait of Hormuz, the narrow waterway through which over 20% of oil flows to the consumer nations, especially in Asia. Since China, the world's top importer, gets most of its oil through this artery, Iran may not take extreme steps to block it, as threatened from time to time. China, a key ally of Iran, made it clear to the stakeholders the waterway is not a playing field for geopolitics.
In the Middle East, meanwhile, although the ceasefire between Iran and Israel still holds, the sabre-rattling has not subsided: President Trump says, for instance, he will bomb Iran again in the event of the latter starting its nuclear programme again; Iran warns the US and Israel against what it calls, any military adventurism, against the Islamic Republic. By coincidence, Iran and Russia are going to conduct some naval exercises in the Caspian Sea tomorrow.
In the past, Iran used to resort to maritime exercises in collaboration with its Arab neighbours, whenever it sensed some form of military action against it: in the past few weeks since the end of the 12-day war, there have been some mysterious explosions in Iran, which were quickly attributed to 'gas explosions'; even its banking system has been under constant cyber attacks despite the cessation of hostilities in the battlefield. In short, the conflict between the arch foes is far from over, although both sides are fully aware of the stakes.
All in all, the prices of crude oil may not go through the roof in the near future, even if the volatility in the region remains really high. They may, however, fluctuate in proportion to the degree of uncertainty in the coming days.
