Oil prices have continued to rise amid the threat of the Syria’s civil war spilling over into a much larger international war.
Brent Crude is now changing hands near the US$116 per barrel marker and experts believe it will breakthrough US$120 in the coming days.
Momentum is growing towards Western intervention in Syria as the United Nations Security Council meets to discuss the possibility of a sanctioned strike, though with both Russia and China expected to veto such a move a Western move, independent of UN authorisation is also a possible outcome.
Weapons inspectors, meanwhile, continue to assess the site of an alleged chemical attack and Ban Ki-moon, the UN secretary general, called for patience so that the findings can be considered.
The escalating conflict, which comes more than three years after the first waves of the ‘Arab Spring’ uprisings, is the most significant threat to the security of the region thus far and expert observers believe it has the potential to become a much broader conflict.
The stability in the Middle East is a persistent factor in the complex geopolitics that underpin the oil market, which largely relies on supplies from the region.
And given the vulnerable state of the economic recovery in America and Europe soaring oil prices could have far reaching implications.
One analyst today suggested it could even derail plans at the US Federal Reserve to taper the US$80bn a month quantitative easing programme.
Ishaq Siddiqi, market strategist at ETX Capital, said: “A conflict on this scale [involving Western powers plus Israel versus Iran/Syria and possibly Russia] could easily engulf the whole of the Middle East region which remains in a mess [Egypt in a dire situation with violence flaring up against the care-taker government daily, Libya’s oilfields disrupted by protestors/rebels and sectarian violence in Iraq].
“This therefore has the potential to trigger a huge disruption to oil supply which will undoubtedly be felt in Western economies.
“Once filtered through to the real global economy, the increase in oil prices will put a halt to the current pace of economic momentum we are currently experiencing in major parts of the world.
“It’s plausible that Brent oil prices could be over $120.00 p/b in the coming days – and, if oil prices spike even higher [above $130 p/b], it wouldn’t be out of the question for the Federal Reserve to hold off on tapering stimulus measures this year.”
In London trading, Brent Crude futures advanced US$1.55 per barrel to trade at US$116.20, while West Texas Intermediary futures were up around US$1.40 at US$110.50.