The recent escalation in the Israel-Palestine conflict, initiated by Hamas launching rockets into Southern Israel, has evolved into a significant and deadly confrontation. Israeli Prime Minister Benjamin Netanyahu has declared it a war, with over 1,100 casualties and thousands wounded on both sides as of Monday, according to AP. This situation may increase the crude oil prices around the world.
Price of Crude Oil Rise Due to Israel-Palestine Tension In the International Market
The conflict is causing worldwide economic repercussions, including in India. While Israel and Palestine aren’t major oil players, the conflict is occurring in a key oil-producing region. Crude oil prices have already spiked, rising up to five percent due to fears of further escalation. US-brokered talks to normalize Saudi-Israel relations may be delayed, impacting oil production and prices, as suggested by a report from Mumbai-based risk consultancy firm Mitkat Advisory.
Higher oil prices could lead to inflation pressure in India, weakening the rupee and making gold more attractive as an investment hedge. This, in turn, could drive up domestic gold prices, explained Rachita Malik, an analyst at MitKat. The uncertainty and violence in Israel have also pushed gold prices up by over one percent as some investors seek safe-haven assets.
In terms of India-Israel bilateral trade, the Embassy of India in Israel reported that in the financial year 2022-23, trade between the two countries, excluding defense, reached $10.1 billion. During that fiscal year, Indian merchandise exports to Israel amounted to $7.89 billion, while Israeli exports to India were valued at $2.13 billion.
India’s significant exports to Israel comprise automotive diesel, chemical and mineral products, machinery and electrical equipment, plastics, textile and apparel, transport equipment, and agricultural products. Additionally, India primarily imports defense machinery, petroleum oils, and electrical equipment from Israel.
It can be concluded that India’s major exports to Israel encompass automotive diesel, chemical and mineral products, machinery and electrical equipment, plastics, textiles and apparel, transport equipment, and agricultural products. Conversely, India primarily imports defense machinery, petroleum oils, electrical equipment, and transport equipment from Israel. The bilateral trade relationship may face challenges if the Israel-Hamas conflict prolongs, diverting Israel’s resources toward conflict response.
Regarding the increase in the value of the US Dollar, the report suggests that growing geopolitical risks may drive investment into safe-haven assets like gold and the US Dollar. The Israel-Hamas conflict could also potentially boost demand for US Treasuries. This surge in demand for the US Dollar could lead to its appreciation in the foreign exchange market. An upward trend in the US Dollar’s value could result in higher prices for imported products, especially oil.