What do Israel's elections mean for oil prices?
USO•BCA Research says Israel’s election outcome could affect the risk of wider Middle East conflict and an oil supply shock. It sees a 70% chance tensions stabilise or ease, but estimates the risk of a major conflict rises to 42% if Benjamin Netanyahu remains in power, potentially pushing oil to $150 a barrel or higher.
1. Election leaves uncertainty
Israel’s election failed to produce a clear winner, leaving coalition talks likely to drag on and creating uncertainty over future policy towards Iran. Benjamin Netanyahu remains in office as caretaker.
2. Oil risks and outlook
BCA Research strategists Jesse Kuri and Matt Gertken say another Netanyahu-led government would raise the risk of Israeli escalation and a major oil supply shock, while an opposition victory would reduce—but not eliminate—that risk. BCA sees a 70% chance tensions stabilise or ease, helped by improving shipping conditions in the Strait of Hormuz and the possibility of renewed US-Iran talks; in that scenario, oil prices would likely remain around current levels. The firm estimates the chance of a larger conflict and serious oil supply shock rises to 42% if Netanyahu remains in power, a scenario that could push oil to $150 a barrel or higher and revive concerns about inflation and global growth.
