The conflict between Iran and Israel has led to fear of global war, with Tehran threatening to close the Strait of Hormuz that accounts for 20 percent of the world’s oil export.

By Chuol Chanyong

A senior economic analyst has cautioned the citizens about the increasing conflict in Middle East amid the rising price of crude oil in the market.

Dr. Abraham Maliet said there is no joy over of the increasing crude oil price as the news comes with its own impact on the local consumption.

The conflict between Iran and Israel has led to fear of global war, with Tehran threatening to close the Strait of Hormuz that accounts for 20 percent of the world’s oil export.

As of yesterday, global oil prices shot above the $80 per barrel projecting repercussions for countries already struggling with financial difficulties, such as South Sudan, which relies on oil revenues for 90% of its income and lacks a domestic oil refinery for local consumption.  

Dr. Abraham stressed that people should not celebrate rising oil prices, as every increase comes with its own costs.   

“People should not be smiling over rising oil prices, nor should we consider it as not a jackpot, Even if prices rise, traders will provide protection and protection also comes at a cost.”  

He added, “Prices did not rise due to a lack of protection, but because, the passage is now being controlled. Even if you get a million dollars per barrel, there will be many associated costs to reach that million. So, it’s business as usual.”  

He said the sharp increase in the price of the crude oil is not under normal circumstances, noting that everything will come with a high cost.  

On Sunday Iran threatened to close the Strait of Hormuz following the United States strikes on nuclear sites.

Given South Sudan’s 90% dependence on oil and its lack of domestic refining capacity, compounded by pipeline collapses and the recurring halt of exports via Port Sudan, these price hikes may bring little benefit. Instead, they could worsen the economic crisis due to higher costs of importing refined fuel.  

Dr. Abraham said even if oil prices rise, South Sudan’s oil income is constrained by preexisting future contracts.

Impact after US strike

Meanwhile, as the conflict simmers, oil markets are entering a new phase of uncertainty after the U.S. joined the war between Iran and Israel, with experts warning of triple-digit prices.

Investors remain cautious while waiting for Tehran’s reaction following the U.S.′ strikes on its nuclear facilities, with Iran’s foreign minister warning his country reserved “all options” to defend its sovereignty. 

“There is real risk of the market experiencing unprecedented supply disruptions over coming weeks, of a much more severe nature than the oil price shock in 2022 in wake of the Ukraine war,” senior energy analyst Saul Kavonic told CNBC Africa.