The global oil market has experienced a significant surge in prices, with Brent crude oil now trading at approximately $77 a barrel—a 7 percent increase in just over a week.
As tensions escalate in the Middle East, Treasurer Jim Chalmers has raised concerns about the escalating conflict’s human and economic impacts, particularly the risks associated with rising oil prices.
Chalmers emphasized the potential consequences of sustained high oil prices in Australia, stating, “For every 10 percent sustained increase in the price of Brent oil, it takes about 0.1 percent off our GDP and adds roughly 0.4 percentage points to our Consumer Price Index.”
The increased cost of oil could lead to higher inflation, putting additional strain on Australian households and businesses already facing cost-of-living challenges.
Chalmers also highlighted the broader implications of the situation on the global economy, noting that almost a third of the world’s oil comes from the Gulf, emphasizing the region’s crucial role in global supply chains.
The volatility in oil prices comes at a time when other global economic factors, such as concerns about the Chinese economy and developments in the U.S., are also contributing to uncertainty.
Australia, along with other leading countries, has been advocating for a ceasefire in the region to address the growing tensions.
Recent reports indicate that oil prices surged last week, marking their largest weekly gains in over a year due to fears of a wider conflict in the Middle East. Brent crude rose to $78.05 per barrel, while U.S. West Texas Intermediate crude increased to $74.38 per barrel.
This escalation followed Israel’s retaliation against Iran for missile attacks after the assassination of a Hezbollah leader. However, U.S. President Joe Biden’s urging of Israel to reconsider targeting Iranian oil facilities caused some fluctuations in prices.
The weekly gains for Brent and WTI were over 8 percent and 9 percent, respectively, the highest since early 2023.
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