Potential escalation in Middle East raises oil price concerns

US officials have warned of an imminent attack on Israeli assets by Iran or proxies, potentially causing a wider conflict in the Middle East. Oil Prices (BZ=F, CL=F) could be impacted as the escalation pours further doubt on oil production in the region.

Senior Columnist Rick Newman joins Yahoo Finance to break down the potential of a wider conflict in the Middle East and how that may impact the energy sector.

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance.

This post was written by Nicholas Jacobino

Video transcript

JULIE HYMAN: New reports from US officials show an attack on Israeli assets by Iran could be imminent. Investors and energy traders have been worried about a wider Middle East war. Could this be it? Let's ask Yahoo Finance's Rick Newman. This has been talked about in recent days ever since Israel struck a target in Damascus, an Iranian target. And now there's been talk about-- and inevitably, it would probably continue to go back and forth.

RICK NEWMAN: Right. And Israel killed an Iranian commander in that strike in Damascus. And this is a report in "The Wall Street Journal" today by Warren Strobel. Shout out to Warren Strobel. I used to work with him. A great reporter there. The US intelligence community has gotten some of these right. They supposedly told Moscow that this terrorist attack was coming in. They even predicted it could be on a concert venue, and then it happened. So-- and they also, of course, were correct that Russia was going to invade Ukraine in 2022. So they've gotten these things right. So it seems worth paying attention to--

Israel and Iran have been fighting this kind of shadow war for a long time. And I mean, if you look at what's been happening with oil prices, I mean, we've seen oil prices drifting up about $15 per barrel since December. That coincides with things have been happening in the Middle East, these Houthi attacks on cargo in the Red Sea, which is forcing a lot of the ships to go around. And ever since this war broke out in last October,

I mean, the biggest concern for markets has been how big is this going to get. If it remains contained between Israel and Hamas in that part of the Gaza Strip, it is less of a problem for global markets than if Iran gets involved, than if Saudi Arabia gets involved, that it starts to affect global energy supply.

So every time I hear a report like this it gets my attention. And if Iran does something, I mean, I think you would see an immediate reaction in oil prices, even if it's just the fear premium. But oil prices are more important now than they usually are because Joe Biden's trying to get reelected.

And he is doing everything he can to keep oil prices and gasoline prices down, including some things most people don't see, such as sanctions policy toward Venezuela, things like that. Where we're only talking about a tiny amount of oil, but Biden is doing everything he can to keep as much supply on the market and prices down, And obviously he hopes this doesn't escalate.