Tensions in the Middle East and their impact on oil prices

The situation in the Middle East has long been one of the key factors influencing oil prices. The current tensions between Israel and Iran, which include the potential threat of disruptions to supplies through the strategic Strait of Hormuz, are raising concerns about a significant increase in prices. This week, the price of Brent crude rose by 10% to around USD 77 per barrel. Various scenarios for how the situation may develop are emerging on the oil market. In a milder scenario, the conflicts would remain localised, without directly restricting oil production or transport, which would lead to a moderate price increase of between 5% and 15% from current levels. This scenario would primarily reflect increased risk and caution on the part of investors.

In a more serious scenario, oil supplies could be disrupted, for example due to attacks on infrastructure or the closure of key transport routes. In such a case, prices could rise by tens of percent, for example to over USD 100 per barrel. Such a development would put significant pressure on the global economy, where rising energy costs would trigger a sharp rise in inflation and a deterioration in the economic outlook. For financial markets, this would mean increased volatility and a shift towards safer assets.

There is also a scenario of a rapid diplomatic settlement that would stabilise the situation and gradually calm the markets. The price of oil could then fall back to around USD 70 per barrel or even lower, especially if supply from other parts of the world, such as the US or Africa, increased at the same time. In this case, the negative impact on economies would be limited and inflation would probably remain under control.

For the Czech Republic, which is dependent on oil imports, these scenarios pose a significant risk. Higher oil prices mean rising fuel costs, which will translate into higher transport, logistics and production costs. Increased inflation could reduce household purchasing power and slow economic growth. In addition, pressure on energy prices could trigger broader secondary effects in the form of rising prices for goods and services. The Czech Republic therefore needs not only to monitor developments in the Middle East, but also to strengthen energy diversification and reserve capacities in order to minimise its vulnerability to such external shocks.