What the oil price says about the Iran crisis

THE ongoing conflict in the Middle East continues to unsettle markets but perhaps to a lesser degree than investors feared.

- GEORGE BROWN AND MALCOLM MELVILLE

Despite the intervention of the US, markets’ reaction has been contained. Oil prices initially rose, reaching over $81 (R1465) a barrel, but quickly fell back to their range of the previous week. Global conflict often transmits into wider economic and market performance via inflation, and energy prices are a key contributor. This is why, during geopolitical flashpoints, the oil price becomes a point of focus. What factors are influencing oil prices in relation to today’s Middle East crisis?

Oversupply of oil keeps prices under $80 a barrel.

The global economy currently enjoys a healthy oil surplus. This helps keep prices in the mid to low $70s, a historically moderate range.