A fresh conflict in the Middle East poses a new danger to the global economy.

The recent conflict in the Middle East is further disrupting the global energy markets, adding pressure to an already struggling world economy. This comes at a precarious time for leaders in the United States and Europe.

The recent unexpected assault launched by the Palestinian organization Hamas in Israel has prompted lawmakers to urge for stricter sanctions against Iran and potentially disrupt attempts to improve relations between Israel and Saudi Arabia. This could lead to a sharp increase in oil prices, which are already at a high level.

The cost of goods started to rise when the markets reopened on Sunday evening, with the worldwide standard increasing by 5% to about $89 per barrel at 9:30 p.m. EDT. By 9 a.m. on Monday, the price had dropped below $88.

The combination of economic struggles and war is creating additional difficulties for President Joe Biden, who will be up for reelection next year. This is compounded by ongoing concerns about inflation, while at the same time, U.S. allies like Germany are dealing with a rise in populist sentiment, partially due to rising energy prices.

In August, despite facing sanctions to pressure them to give up their nuclear aspirations, Iran remained the eighth biggest oil supplier and shipped approximately 2 million barrels per day.

Experts on energy have stated that the country has become more skilled at avoiding trade restrictions by using transfers between ships to transport larger quantities of discounted oil to China.

According to lawmakers, Biden should take immediate action to restrict exports as Iran’s leaders have expressed admiration and provided assistance to Hamas in their attacks against Israel.

On Saturday, Senator Jim Risch of Idaho, the leading Republican on the Senate Foreign Relations Committee, stated that these assaults highlight the necessity for a stronger U.S. approach towards Iran. He believes that this approach should effectively limit the regime and its allies’ access to resources.

He stated, “There is a need for significant improvement in sanctions and their enforcement, specifically regarding Chinese purchases of Iranian oil.”

The recent agreement made by Biden to release five imprisoned Americans and revive the Obama-era deal, which aimed to prevent Iran from developing nuclear weapons while easing sanctions, has been strongly criticized for granting Iran access to roughly $6 billion of frozen assets.

The Biden administration has emphasized that the funds, originally transferred from a South Korean bank account to one in Qatar, are strictly designated for humanitarian use. However, certain Republicans attempted to connect the money to the recent Hamas attacks, a statement that the administration has deemed false.

“I firmly believe that the Biden Administration should face consequences for their efforts to appease Hamas terrorists, such as providing them with billions of dollars and support from Iran,” stated House Majority Leader Steve Scalise (R-La.) on Saturday. Scalise, who is vying for the role of speaker to fill the vacancy left by Rep. Kevin McCarthy (R-Calif.), made these remarks.

During a CNN interview on Sunday, Secretary of State Antony Blinken stated that the Iranians have not utilized any of the $6 billion. According to the administration, the Treasury Department is monitoring the funds.

According to Blinken, Iran has always had the legal right to use these funds for humanitarian purposes under our law and sanctions. They were simply transferred from one account to another in a different country in order to make this usage possible.

Biden declared his backing for Israel’s reaction to the Hamas attack, stating on Saturday from the White House that “the US stands in solidarity with the citizens of Israel against these acts of terrorism.”

He stated, “Israel has the right to protect itself and its citizens. That is final.”

The Saudi role

The future of oil supplies from Saudi Arabia, the world’s leading exporter of oil and second largest producer after the U.S., is uncertain due to the implications of the Hamas attack.

According to sources from both the U.S. and Saudi Arabia, The Wall Street Journal reported on Friday that Saudi officials are open to increasing their oil production in the beginning of next year. This move is seen as a way to garner support in the U.S. for a potential agreement in which Saudi Arabia would acknowledge the existence of Israel.

The possibility of a peaceful agreement with Israel became more complicated following the recent outbreak of violence. The Saudi government’s reaction to the attack was not as strong as it could have been, as it only urged restraint and reiterated its previous condemnation of Israel’s actions against the Palestinian people.

The assault was intended to sabotage any efforts to improve relations with Saudi Arabia, specifically due to the potential threat it poses to Iran. Hezbollah, a group connected to Iran, praised the Hamas attack as a warning to those who support normalizing relations with Israel.

Without a larger agreement with Israel and the U.S., the Saudis have expressed a willingness to restrict exports in order to maintain high oil prices.

The nation recently decided to independently withhold 1 million barrels of crude oil per day from the international market. This action is in addition to export reductions implemented by the larger OPEC+ group, which also includes Russia.

During his interview with CNN, Blinken stated that doubts surrounding Iran’s intentions are at least believable.

According to him, the groups that are against normalization are Hamas, Hezbollah, and Iran. This means it’s possible that the attack was intended to interfere with the efforts to bring Saudi Arabia and Israel closer, as well as other countries who are interested in normalizing relations with Israel.

Blinken cautioned that “normalization” should not be used as a replacement for Israelis and Palestinians finding a solution to their differences.

This report was contributed by Ben Lefebvre.

Source: politico.com