US-Iran row makes oil market volatile

One of the fallouts of the killing of Iranian general Qassem Soleimani in a US drone attack in Baghdad on Jan 3 is the wildly fluctuating international oil prices. Both the Brent Crude and West Texas Intermediate, two most widely used crude pricing benchmarks, increased about 3 percent on Jan 6. Oil prices surged again with the two benchmarks rising more than 4 percent after Iran fired more than a dozen missiles at US military bases in Al-Assad and Irbil in Iraq on Jan 7.

However, oil prices dropped on Jan 8 when Washington and Teheran retracted from their belligerent stand and the situation appeared to cool down somewhat. With the growth in China's demand for oil decelerating and no new growth points emerging, the fundamentals of global oil demand and supply remain stable.

Sitting on 60 percent of the world's total oil reserves and accounting for nearly one-third of global supply, the Middle East is a heavyweight in the international oil market. Although the United States and Iran have stepped back from their bellicose stance, the risk of a confrontation cannot be fully ruled out. Combined with that, the geopolitical games being played by different parties in the region will continue to influence oil prices at least in the short term.