Israel’s strike to Iran and its reaction to Iran initially caused tremors in global financial markets.
Oil prices have soared in particular, but the cost of crude oil has lagged behind after missile and drone strikes occurred between the two countries.
However, oil prices are $10 more than a month ago, and there are concerns that increased energy costs may make everything more expensive.
This is what happened after Russia invaded Ukraine three years ago, affecting the lives of people around the world.
The attack prompts the market to react immediately.
Brent crude oil – a major international benchmark – rose to above $78 a barrel on Friday. Since then, it has dropped to about $74.50, but it is still $10 higher than this time last month.
Oil prices have been rising in response to large geopolitical events and global economic conditions, so it is not surprising to see oil prices react to the Israel-Iran conflict.
However, the price is much lower than what it was a year ago. It was also well below the peak in 2022 after Russia’s invasion of Ukraine, when it soared to nearly $130 a barrel.
When wholesale oil prices rise, many people first notice it when it causes gasoline prices to rise.
But more expensive energy sources can almost reach higher prices, from agriculture to manufacturing.
On the food side, higher energy costs can lead to higher prices on the shelves in many ways. It can make running agricultural machinery, transporting agricultural products, and processing and packaging food more expensive.
However, this happens only when energy prices remain high for the duration.
Even with gasoline and diesel, rising crude oil prices will only have a limited impact.
“A rough rule of thumb is that a $10 increase in oil prices will increase the price of the pump by about 7p,” said David Oxley of Capital Economics.
But, he warned, it was not just an oil story.
Many will remember the shock of prices after the Ukrainian conflict began. Oxley said this was largely a response to the rise in gasoline prices.
Many of us use natural gas to heat our homes, and in the UK, electricity prices are also related to gasoline prices.
Gasoline prices also rose after the attack last week. However, given how the market operates, including the role of regulators in the cap price, this impact will only cause families to flow slowly to the household.
