1. Geopolitical Issues in the Middle East and the Rise in Oil Prices
Instability in the Middle East is a major factor affecting international oil prices. If we look at cases such as the Arab Spring and the Gulf War, we can see that political instability in the Middle East has caused international oil prices to rise.
In particular, during the Arab Spring, oil prices rose from $70 per barrel of WTI in early 2010 to more than $110 per barrel in April 2011. In addition, after the Gulf War, international oil prices continued to show an upward trend.
However, over time, the influence of political and military issues in the Middle East on oil prices has gradually decreased. In other words, the relationship between "geopolitical risk" and "oil prices" is weakening.
2. Learning effect: Market reaction based on past experience
The current market reaction, which is showing more moderate changes instead of sharp swings in oil prices, can be considered a "learning effect". Due to the learning effect of past experiences, investors expect oil prices to not increase significantly in the short term in the event of trouble in the Middle East, and this expectation influences the actual price change.
3. US military intervention and global equity markets
U.S. military involvement in the Middle East is also a factor affecting global equity markets. When the US military intervenes in the Middle East, as it did during the Gulf War, it provides positive momentum to the stock market. This is due to the huge financial resources mobilized by the US involvement in the war.
4. Prolonged wars and market unrest
However, both the learning effect and the positive stock market reaction mentioned above are based on the expectation that the war will end in a short period of time. If the Israel-Hamas conflict were to prolong, the outcome could be different.
A prolonged war increases uncertainty, which in turn increases investor anxiety. Therefore, a prolonged war may weaken the "learning effect" and accelerate the upward trend of international oil prices.
5. Conclusion: Market stability and uncertainty
In conclusion, if the current conflict in the Middle East ends in the short term, financial markets may remain relatively stable due to the learning effect and US military intervention. However, if the war is prolonged, financial market instability will increase with the continued rise in international oil prices.
A prolonged war will continue to drive up the price of oil, which raises inflationary concerns and the possibility of further austerity. These factors will irritate financial market sensitivities, which could amplify market participants' anxiety.
Thus, while learning effects may stabilize equity and financial markets in the short term, we expect higher oil prices and subsequent instability in financial markets to increase as the war becomes more likely to be protracted.
Many economists agree with this judgment, and are closely monitoring developments in the Middle East and the resulting trends in international oil prices. It is difficult to predict what the future will bring, but we hope for the best.
