Author: BlackMask Financial

A recent release  by Bloomberg Intelligence (BI) warned that, according to a new analysis by BI and Bloomberg Economics (BE),

“an escalation to a direct war between Israel and Iran could result in oil prices rising to $150 a barrel and global output cut by $1 trillion”.

Ziad Daoud, Chief Emerging Markets Economist at BE and co-author of the report, said in the release that the organization’s base case is that the war will remain largely confined, with limited impact on the global economy, but pointed out that this could change.“A risk scenario involving a prolonged conflict could result in a global recession that takes about $1 trillion off global GDP, with surging oil prices, and plummeting sentiment dropping growth to 1.7 percent,” Daoud added.“Outside of the financial crisis and pandemic, that would be the worst growth for world economy since 1982, when the Federal Reserve hiked interest rates to contain inflation from the 1970s oil shock,” Daoud continued. The BE representative noted in the release that the world economy is still recovering from an inflationary cycle exacerbated by Russia’s invasion of Ukraine in 2022 and said “another conflict in a critical energy-producing region could significantly recharge inflation to nearly seven percent this year”. Significant disruption of production in the Persian Gulf region, or to transport of oil in the extreme case of a potential blockage of the Strait of Hormuz, could shift OPEC+ policy to maximum output, according to BI and BE, the release stated.In this case the spare production capacity in Saudi Arabia, the United Arab Emirates, and Kuwait would become irrelevant if the strait is shuttered, the release warned. BI’s release pointed out that the new BI and BE study examined the impact of four scenarios “in the context of the ongoing Israel-Hamas conflict”. In addition to a direct war, the study looked at a proxy war, a “confined war”, and a ceasefire, the release outlined.

“A proxy war, where Iran and Israel clash through proxies such as Lebanon and Syria, while less destructive than a direct war, may cost the global economy up to $300 billion, as prices jump up around $10 a barrel and investor confidence subsides. “Oil prices shrugged off Iran’s April 13 strikes on Israel, suggesting that markets see the extension … of a confined war as the most likely scenario. BI and BE see risks for oil skewed to the upside as healthy demand and OPEC+’s tight grip on supply form a solid fundamental backdrop,” it continued.

BI stated in the release that the impact of a potential cease-fire on oil prices would likely remain limited as the current geopolitical risk premium appears negligible.

“In a recent BI survey, 92 percent of 143 respondents said that there’s a less than $5 a barrel geopolitical risk premium attached to prices by the market,” BI added. “Red Sea attacks have had a limited effect on prices so far and OPEC has a meaningful amount of spare capacity (c. 6.8 million barrels a day), notes BI. Moreover, OPEC+ output policy likely won’t change in a ceasefire scenario if the impact on prices remains constrained,” it went on to state.  Analysts at Morningstar DBRS said the ongoing Russia-Ukraine and Israel-Hamas wars “could lead to a meaningful disruption of oil supply, potentially causing oil prices to surge”. In its latest short term energy outlook, which was released earlier this month, the U.S. Energy Information Administration (EIA) warned that “there remains significant uncertainty centered around ongoing developments in the Middle East, which have the potential to increase oil price volatility and lead to sharp increases in oil prices”.

“Prices increased in April due to falling global oil inventories. Geopolitical tensions also supported crude oil prices amid conflict between Iran and Israel, which added uncertainty to already heightened tensions in the Middle East,” the EIA said in its latest STEO.

“Despite these tensions, crude oil price volatility has been subdued for much of this year by significant spare crude oil production capacity. If holders of spare production capacity choose to deploy it, supply can be available to the oil market in the event of any short-term supply disruption,” it added.

The Organization of the Petroleum Exporting Countries (OPEC) said on Tuesday in its latest version of its Monthly Oil Market report that the global oil demand growth estimates for 2024 remained “broadly” the same compared to the last month’s assessment, standing at 2.2 million barrels per day (bpd). While there were “minor upward adjustments to 1Q24 data, including a slight upward adjustment in OECD Americas and Chinese data,” over better-than-anticipated oil demand performance in the reported quarter, this was offset by “a downward revision to the Middle East in 2Q24 and 3Q24,” as a slight decrease is expected in these two trimesters. For 2025, global oil demand growth is estimated to stand at 1.8 mb/d, also unchanged from the last assessment.

Hundreds of Israelis stormed the courtyards of the Al-Aqsa Mosque in Jerusalem on Tuesday, Al-Jazeer and Palestinian news agency WAFA reported. According to the reports, the Israelis raised the Israeli flag at the site. The incident took place on Israel’s Independence Day amid calls from Jewish groups to take control of the mosque. Meanwhile, Israeli police reportedly tightened measures around the mosque and conducted ID checks of Palestinians trying to enter it.

UNRWA: Nearly half a million forcibly displaced from Rafah

 

United States Secretary oRafah’sa f State Antony Blinken (pictured above discussed Monday the Israeli military operation in Rafah, the displacement of Palestinians, and the state of the border crossings with Egypt’s Foreign Minister Sameh Shoukry (right) in a phone call, the State Department said in a statement. Blinken reaffirmed that the US “does not support a major military ground operation in Rafah” due to the humanitarian condition of over a million people seeking shelter in the city. He stressed his government’s stance of “rejection of any forced displacement of Palestinians from Gaza.” Moreover, the two politicians talked about the humanitarian aid flow in the region using the Kerem Shalom crossing point “to its maximum extent” as well as the “reopening of the Rafah border crossing.” The protection of aid workers was also part of their conversation.

Sky News host Chris Kenny says the West must be “very sceptical” of death toll claims coming from Gaza as they are numbers only Hamas allows out of the region. “I have said before that we have to be very sceptical … about claims made when it comes to casualties in Gaza … the only numbers coming out of Gaza are numbers that Hamas allows out of Gaza,” Mr Kenny said.

“The UN, quietly, has dramatically revised downwards its claims about the number of women and children killed in Gaza, just a week ago they were claiming more than 9,500 women had been killed and more than 14,500 children, two days later, they reduced those numbers to less than 5,000 women and less than 8,000 children.

“If those numbers are true, they are horrible, a horrendous toll, a terrible loss because of a war Hamas has deliberately, started, and deliberately prolonged.

“So, the UN now revises down the civilian toll by almost half … the bottom line is the war must end … Hamas must hand over the remaining hostages and surrender its terrorists, the sooner the better.”

Farhan Haq, deputy spokesperson for UN Secretary General António Guterres, said last week the UN is consistently revising and cross-checking its figures — which it obtains from Gaza’s Ministry of Health, the Gaza Media Office and other sources — but blamed the “fog of war” for the difficulty in being able to ascertain accurate death tolls. Israeli officials and others have criticized the UN for relying on statistics from Gaza’s government, which has been run by Hamas since the group took control of the territory in 2007, and for using figures that don’t differentiate between Palestinian civilians and combatants.

NN: Hamas is making idiots of the free world

An Israeli fighter jet intercepted a drone as it approached Israeli airspace from the east, the Israel Defense Forces (IDF) announced. The military clarified that the drone was downed before breaching Israeli territory, hence no alarms were triggered. This incident comes amidst heightened tensions in the region, as Israel continues its war on Gaza while fighting a concurrent battle along its border with Lebanon.

US destroys two Houthi drones, one anti-ship missile

The United States Central Command (CENTCOM) stated in a post on X, formerly Twitter, that its forces destroyed one uncrewed aerial system (UAS) in a Houthi-controlled area of Yemen on Monday. Additionally, US forces neutralized another UAS launched by the Yemen-based Houthis over the Red Sea on the same day. The report stated further that the USS Mason destroyed one inbound anti-ship ballistic missile fired off by the Houthis over the Red Sea. “There were no injuries or damages reported by US, coalition, or merchant vessels,” CENTCOM stated.

Hezbollah claims responsibility for 7 attacks on Israel

Hezbollah asserted responsibility for seven attacks on Israeli targets, as stated in its daily report. The group claimed these actions were retaliation for Israeli strikes on southern Lebanese communities, particularly in Odaisseh, affecting civilian residences. The most recent assault targeted Israeli soldiers in the settlement of Metulla, a drone strike on an Israeli military base in Beit Hillel, a rocket strike on Kfarchouba and an antitank-guided missile attack on an Israeli Merkava tank.

The Biden administration supposedly assessed that Israel gathered enough troops on the edge of Gaza’s southern city of Rafah for a full-scale incursion into the city in the coming days, CNN reported, citing two senior administration officials.Senior United States officials are allegedly unsure if Israel intends to commit to a major invasion of Rafah, with one of the sources cited by the news agency stressing that Israel is currently “nowhere close” to making suitable preparations for such a move, as it hasn’t yet established the proper infrastructure related to food, hygiene and shelter for civilians. US President Joe Biden previously stressed that a major ground operation in Rafah would mean the end of offensive weapons shipments for Israel. NN:  i See a full blown invasion and soon.

Crude oil prices for future contracts rose on Monday as investors braced for the release of the Organization of the Petroleum Exporting Countries (OPEC) monthly report on May 14, which will reveal the group’s outlook for the coming period. Additionally, the ongoing conflict between Israel and Hamas appears to have sparked concerns about the possibility of the Middle East conflict escalating further. This, in turn, raised the potential for it to impact the supply of the commodity. West Texas Intermediate (WTI) for June contracts surged 1.52% to $79.47 per barrel at 10:34 am ET. Brent for July deliveries jumped 1.21% to $83.77 per barrel.

EIA: US crude inventories down by 1.4 million barrels

Commercial crude oil inventories in the United States, which are not taking into account those in the Strategic Petroleum Reserve, were down by 1.4 million barrels to 459.5 million barrels in the week ending May 3, the Energy Information Administration (EIA) revealed in its report on Wednesday. The figure marked a slightly lower-than-expected draw. The country’s inventories now stand 3% below the five-year average for this time of year. US crude oil refinery inputs averaged 15.9 million barrels per day for the corresponding week, which is 307,000 barrels per day more than the previous week’s average. Refineries operated at 85.5% of their operable capacity last week, while gasoline production increased, averaging 9.5 million barrels per day. Imports of crude oil in the country averaged 7 million barrels per day last week, going up by 198,000 barrels per day. Total commercial petroleum inventories fell by 2.1 million barrels last week.

The Israeli military ordered fresh evacuations from areas in Rafah Saturday as it prepared to expand operations in Gaza’s southernmost city. A post on social media site X by Avichay Adraee, the Israel Defense Forces spokesperson for the Arab media, called on people to leave Jabalia, as well as a refugee camp in the area, along with several other neighborhoods in the city. People living there were in a “dangerous combat zone,” he said, adding that Hamas was trying to rebuild its capabilities in the area. “Therefore everyone who is in those areas exposes themselves and their families to danger,” he added. “Go immediately to the shelters west of Gaza City,” he said. The warning came amid heavy clashes on the outskirts of the city between Israeli forces and Palestinian militants leaving the crucial nearby aid crossings inaccessible. More than 110,000 people have already fled north from the city. Adraee advised others to move to Al-Mawasi, a nearby coastal area where Israel has promised an “expanded humanitarian area” would await them.

Ukrainian drones hit an oil depot and an electric substation in Russia, Ukraine’s Channel 24 reported on Monday citing a source. According to the source, Ukraine’s unmanned aerial vehicles (UAVs) were hovering over the Belgorod and Lipetsk regions, located on the Russian territory, overnight, striking the aforementioned objects and damaging them. Meanwhile, earlier, Moscow shared that its forces intercepted 31 Ukrainian drones, alongside 16 missiles.