Oil’s Tug-of-War: Iran Tensions vs. Evergrande

31 Oca

Oil’s Tug-of-War: Iran Tensions vs. Evergrande

On Wednesday, WTI crude futures dropped below $77 per barrel, undoing a 1.4% increase from the prior session, all while the U.S. readies itself to address a lethal attack on its troops in the Middle East.

Perhaps traders are concerned more about the liquidation of China Evergrande, raising worries about the overall Chinese economy. There is fear that this uncertainty in China could lead to a decrease in demand for crude oil.

However, there is a question of whether traders might be underestimating the potential for U.S. responses to the lethal attacks to escalate tensions or lead to a conflict with Iran.

Despite President Biden expressing a desire to avoid a wider war in the Middle East, there are concerns about the unpredictable outcomes of such military actions.

The Guardian predicts dire consequences if there is direct American military retaliation against Iran. This could prolong the Gaza conflict, trigger a Hezbollah attack on Israel, escalate conflicts in Iraq and Syria, and destabilize friendly regimes in Egypt, Jordan, and the Gulf. Additionally, such actions could inadvertently assist China in pursuing its anti-democratic geopolitical ambitions and provide justification for Russia's aggression in Ukraine.