Anastasia Gorbacheva22:41, 08.10.23

An escalation of the situation in Israel could drive up crude oil prices.

The spiral of violence in the Middle East poses five key questions for US President Joe Biden, as the threat of wider and deadlier conflict looms in southern Israel and the Gaza Strip .

Newsweek writes that the United States “unequivocally condemned this horrific attack on Israel by Hamas terrorists from the Gaza Strip.” Biden added that Washington “will offer all appropriate means of support” to Israel in the wake of the “horrific and ongoing attacks.”

US unfreezes Iranian funds

The escalation comes shortly after the Biden administration agreed to allow the transfer of $6 billion in frozen Iranian funds from South Korea to Qatar as part of a prisoner swap deal to free several Americans detained in Iran.VIDEO OF THE DAYPauseUnmute

On Saturday, several Republicans cited the deal as they renewed their criticism of the Biden administration in the midst of worsening violence.

“These Hamas attacks are a disgrace, and Israel has every right to defend itself with force majeure,” said former US President and presidential candidate Donald Trump. “Unfortunately, American taxpayer dollars helped finance these attacks.”

“This is what happens when Biden shows weakness on the world stage, bows to the mullahs in Iran with a $6 billion ransom, and GOP leaders signal America’s retreat as leader of the free world,” said Mike Pence, Trump’s former vice president and now a candidate in next year’s presidential election.

“We are seeing the culmination of Biden’s completely irresponsible policies towards Israel,” added Colorado Representative Lauren Boebert. “He just gave $6 billion to Iran. Now we see the results.”

“Iran is helping finance this war against Israel, and Joe Biden’s easy-to-follow Iran policies are helping to fill his coffers,” said Florida Governor and presidential candidate Ron DeSantis.

The White House has made clear that these funds will be subject to a number of restrictions. Tehran will be able to use them only for “the purchase of food, medicine, medical equipment that will not have a dual military purpose,” White House spokesman John Kirby said.

However, Iran’s Foreign Ministry responded to these restrictions by saying that “competent authorities” in Tehran will determine how the funds will be used.

White House spokeswoman Adrienne Watson said that “not one cent of these funds has been spent, and when they are spent, it can only be spent on food and medicine for the Iranian people.”

“These funds have absolutely nothing to do with today’s horrific terrorist attacks, and now is not the time to spread disinformation,” she added.

“All the money held in restricted accounts in Doha as part of the agreement to release the 5 Americans in September remains in Doha. Not a penny has been spent,” US Treasury Under Secretary Brian Nelson also said.

Saudi Arabia and the Abraham Accords

The escalating violence also likely jeopardized the progress Biden was trying to make in talks with Riyadh to strengthen the Abraham Accords struck three years ago.

In September 2020, the United States led negotiations that resulted in representatives of Israel, the United Arab Emirates and Bahrain signing the Abraham Accords in Washington. Morocco later joined them, and Sudan also signed a declaration, but not a bilateral agreement with Israel.

Under these agreements, Abu Dhabi and Manama became the third and fourth Arab states to recognize Israel, and the purpose of the agreements was to normalize diplomatic relations.

It emphasized “the importance of maintaining and strengthening peace in the Middle East and throughout the world on the basis of mutual understanding and coexistence.”

However, the Biden administration is making efforts to bring Saudi Arabia into the Abraham Accords, which would be a significant foreign policy victory for the administration. However, in the weeks leading up to Saturday’s escalation, a Saudi newspaper reported that Riyadh had frozen talks on normalizing relations, although the US and Israel denied this. However, in mid-September, The New York Times, citing American officials, reported that Washington was discussing a mutual defense treaty with Saudi Arabia.

“This will significantly slow down, if not kill, the Saudi Abraham Accords deal,” Mara Rudman, a former Middle East diplomat during the Obama administration, told The New York Times.

“It strikes at the core of key elements for Saudi Arabia’s entry, the path forward for Palestinians in the West Bank and Gaza Strip,” she said.

As for Israel, there will be “zero appetite” from across the political spectrum to help the Palestinians, “despite the fact that it may actually strengthen, rather than weaken, Israel’s security.”

Biden said he has directed his team to remain in “constant contact” with regional leaders, including Saudi Arabia.

Riyadh’s Foreign Ministry said it was “closely monitoring the development of the unprecedented situation” and that the country’s government called for “an immediate end to the escalation between the parties.”

Split among Democrats

The escalation could further divide Democrats, even as Biden pledged that his administration’s “support for Israel’s security is strong and unwavering.”

In recent years, left-wing Democrats have increasingly withdrawn their support for Israel. In mid-July, Washington Representative Pramila Jayapal called Israel a “racist state” ahead of Israeli President Isaac Herzog’s visit to speak to Congress, although she later apologized.

“I want you to know that we are fighting to send a message that Israel is a racist state, that the Palestinian people deserve self-determination and autonomy,” Jayapal said at the time. “That the dream of a two-state solution is eluding us. That it doesn’t even seem possible.”

In a response letter signed by several Democratic lawmakers, including House Minority Leader Hakeem Jeffries, other Democrats said that “America and Israel share a unique, special relationship based on our shared democratic values ​​and strategic interests.”

“As House Democratic leaders, we strongly support Israel’s right to exist as a homeland for the Jewish people,” the letter said.

It’s not so quiet today

As the escalation continues and the death toll rises, the Biden administration is likely to regret its remarks made just a week ago.

“The Middle East region is calmer today than it has been in the last two decades,” National Security Adviser Jake Sullivan said at The Atlantic, though he then added: “I emphasize ‘yet’ because all of this could change.”

Sullivan spoke with Israeli national security adviser Tzahi Hanegbi, and the US remains “in close contact with our Israeli partners,” White House spokeswoman Adrienne Watson said.

Future gas prices

The escalation in Israel could also reportedly trigger a spike in crude oil prices.

“We could see a sharp jump in crude oil prices when markets open on Monday,” Vandana Hari, chief executive of Vanda Insights, told CNBC.

Israel and Palestine are “on the cusp of an important oil-producing and exporting region,” Hari said, although the conflict does not directly impact major oil-producing countries.

“The impact on oil prices will be limited unless we see the ‘war’ between the two sides quickly escalate into a regional war directly involving the US, Iran and other parties,” Iman Naseri, managing director for Middle East energy consulting company Facts Global Energy.

War in Israel – what economic analysts say

Rising geopolitical risk could lead to buying in assets such as gold and the dollar , and potentially boost demand for US Treasuries, which have been selling off aggressively, experts say .

Wealth Management chief economist Brian Jacobsen said that Iranian oil production is growing, but everything could change, because much depends on Saudi Arabia’s reaction to the war in Israel.

(C)UNIAN 2023