The key here is not Palestinian militants, but Israel's reactions to them. While the level of violence may cause the markets to become jittery, Palestinians are neither major producers nor consumers of oil. It is the Israeli retaliation to Palestinian attacks -- and then wider Arab reactions to those Israeli actions -- that really make the oil markets jump. These actions and reactions have added about a $5 per barrel premium in the oil markets.
This premium, however, is likely to hold in place only so long as the region remains tense. If there are no bombings and no retaliation, there will be no international condemnations, and tensions will alleviate, at least in the short term. Meantime the tensions provide a climate that heightens the significance of threats that would previously have been dismissed out of hand.
Iranian supreme leader Ayatollah Ali Khamanei made such a threat April 5 when he called upon all Muslim states to "shake the world" by halting oil exports to "pro-Israel" Western states. Such an embargo is unlikely since without accompanying revenue and production cuts, any targeted state can easily procure oil from alternative producers. Furthermore, any serious embargo that includes real production cuts would inflict far more harm upon countries that are sympathetic to the Palestinian cause, particularly in Asia.
This, obviously, hasn't stopped Khamanei from threatening a potential embargo. Indeed, his simply making the proposal at Friday prayer services in Tehran jacked oil prices up to $27 per barrel, a level not seen since the week immediately after Sept. 11.
This premium, however, is likely to hold in place only so long as the region remains tense. If there are no bombings and no retaliation, there will be no international condemnations, and tensions will alleviate, at least in the short term. Meantime the tensions provide a climate that heightens the significance of threats that would previously have been dismissed out of hand.
Iranian supreme leader Ayatollah Ali Khamanei made such a threat April 5 when he called upon all Muslim states to "shake the world" by halting oil exports to "pro-Israel" Western states. Such an embargo is unlikely since without accompanying revenue and production cuts, any targeted state can easily procure oil from alternative producers. Furthermore, any serious embargo that includes real production cuts would inflict far more harm upon countries that are sympathetic to the Palestinian cause, particularly in Asia.
This, obviously, hasn't stopped Khamanei from threatening a potential embargo. Indeed, his simply making the proposal at Friday prayer services in Tehran jacked oil prices up to $27 per barrel, a level not seen since the week immediately after Sept. 11.