Has the calm of the Middle East extinguished the flames of oil prices?

The tension in the Middle East over the past two weeks, caused by the targeting of the Iranian consulate in Damascus, led to an increase in the risk factor in oil markets, which was reflected in prices rising amid geopolitical predictions that indicated an increase in the intensity of tensions, awaiting a major Iranian response to the attack, in which Israel was accused and vowed to respond. on him.

The markets calculated these risks surrounding the major producers in the region and the world, as Brent crude oil touched the $92 level for the first time in more than six months.

However, the recent Iranian response and sending more than 300 marches and missiles in response to the Israeli attack, which did not cause any kind of human, economic or military losses other than minor damage, was less than the level of escalation and risk factors calculated in the markets, as it led to a cautious calm, even if the Israelis did not specify their position. From the Iranian response until this moment.

This calmness that prevailed in the atmosphere cast a shadow over transactions in the oil markets, and gains in the markets declined slightly after taking into account high risk factors that would have led to price increases.

But does this calm mean that the flames of oil prices that broke through the $90 barrier for Brent crude have begun to fade and return to lower levels? The answer is that, looking at the main drivers, the tension in the Middle East and the developments between its water straits were not the main and only driver, even if this calm is not clear. Milestones and consequences so far. The demand for oil is still increasing this year and next, and the forecasts of OPEC and the International Energy Agency unanimously indicate that there is an increasing demand for oil.

Tension in Eastern Europe still exists, and the refinery war launched by Ukraine against Russian refineries continues to exhaust Russian production and neutralize more than 12% of its refining capacity, which is the main producer in the OPEC Plus group.

The numbers indicate an improvement in the American economy, and expectations have been strengthened for a reduction in interest rates this year and next year, which will contribute to the recovery of the economy, enhance demand for oil, and liberalize restrictions on the levels of growth of economic activities. There is a player that enters the market frequently, which is the decline in the price of the dollar, which has an inverse relationship with oil prices. The lower the price of the dollar, the greater the demand for oil priced in the same currency, which plays in favor of the rise in oil prices at the present time.

However, the most important main drivers are still in the process of being activated, which is the production reduction approved by OPEC Plus and which it is still committed to as a group, in order to restrict production and seek to eliminate any surplus that leads to instability in the oil market. All of these main drivers, if we exclude the tension in the Middle East, this may not mean that oil prices have lost their other drivers and fuel for the expected rises, especially this summer, which appears to be very hot in light of the intense competition in the upcoming US presidential elections.