The war conflict in the Middle East has created new risks for energy prices, even before the crisis opened by the war in Ukraine is over.

Israel’s response to Hamas’ attack on civilians in its territory leaves no doubt that the war will reach its climax and the fear now is that there will be a more general conflict in the region, which is one of the richest in oil and natural gas.

The biggest concern centers on the possibility that Iran could be directly linked to the attack by Hamas last Saturday or become involved in war, in which case the oil exports of one of the world’s largest producing countries would decrease and cause a further decrease in global supply and strongly upward trend in prices.

Iran had been kept out of the conflict in the early days, which explains why international oil prices rose only $2 to $3 a barrel, or around $87-88 a barrel for Brent. However, Iran’s foreign minister’s statement on Friday that a new front could be opened against Israel if the blockade of Gaza continues, sent the Brent price up to $89 by midday on the same day.

But with the global oil market undersupplied due to production cuts by OPEC+ countries – notably Saudi Arabia and Russia – it is certain that any further significant supply cuts would cause upward pressure.

On the other hand, the war broke out at a time when the oil price rally had stalled. Brent prices exceeded 95 dollars a barrel, only to retreat last week to 84 dollars. Investors’ belief that the interest rates of the major central banks will remain high for a long time, with the consequence that the recovery of the global economy will be very slow and correspondingly the increase in the demand for crude oil, is what led to the reversal of the rally.

In the natural gas market, prices in Europe rose last week spectacularly, with the rise reaching 40% and contracts for delivery in November exceeding 53 euros per megawatt hour on Thursday. The surge in prices has been driven mainly by the war and a reduction in exports from Israel’s natural gas fields to Egypt, where they are converted into LNG headed for Europe, as well as concerns about a wider flare-up in the Middle East.

There were, however, two other factors that led to the jump in prices. First, the gas leak detected in the Finland-Estonia interconnector undersea pipeline, which is being investigated on suspicion of sabotage, recalling the leaks that occurred last year in the Nord Stream pipeline system.

Second, warning workers at Australia’s two major LNG export facilities, which account for 6% of global supply, that strikes will begin next week. However, the corresponding mobilizations that took place last month were quickly stopped and the supply from these units became normal.

And in the case of natural gas there are factors that can hold prices down if there is no generalization of the conflict in the Middle East, as can be seen from the fact that prices for winter delivery contracts were very close to those for contracts on Thursday delivery in November.

The almost 100% capacity of storage tanks in the EU, the decrease in demand from European industries, the increase in LNG terminals in Europe, the slow recovery of LNG demand from China, but also the forecasts for a relatively mild winter this year in Europe are factors that could hold prices down.