New Mideast threats mean uncertainty for oil, trade, stability in August

After July’s headlines buzzed about a reshaped US presidential race, August’s news cycle struggled to escape the long shadow of conflict in the Middle East as Israel-Iran tensions boiled following the July 31 assassination of Hamas chief Ismail Haniyeh in Tehran.

Outside the spotlight, another hot spot is also flaring up in the region, as Libya again plunges into chaos amid political fallout over the leadership of the fractured country’s central bank. The dispute has prompted oil field shutdowns, and on Aug. 26 the UN warned the crisis risks precipitating Libya’s financial and economic collapse.

Despite this turmoil, global markets continue to mostly shrug off regional tensions. As of this writing, Brent crude was trading at about $78 per barrel, down from roughly $80 on Aug. 1 (and $88 just after Oct. 7, 2023). Still, the Gaza war continues to pose major economic threats globally and locally as the fighting nears the one-year mark. 

New risks of regional confrontation have fueled everything from widespread flight cancellations to ongoing oil market uncertainty and global trade worries. Persistent Houthi attacks on Red Sea shipping are hitting local players, with UAE port operator DP World reporting that profits fell 60% in H1 2024. Simultaneously, the specter of Iran ensnaring energy shipments in the Strait of Hormuz loomed large in August.

Meanwhile, keep an eye on the next moves from OPEC+. The oil cartel will (supposedly) begin raising oil production in October as it unwinds its voluntary output cut of one million barrels per day. Regardless, prices are unlikely to reach the $90 range needed for most Gulf economies to balance their budgets in 2024-2025. On that note, this month saw Saudi Arabia reveal that its oil revenues fell to a three-year low in June as the world's largest oil exporter saw sales squeezed by OPEC+ cuts.