Concerns about escalating tensions in the Middle East drive up oil prices, Citi warns that risk premium may increase

As concerns over escalating tensions in the Middle East outweigh intensive diplomatic efforts in the region, crude oil futures prices have risen. Francesco Martoccia, a Citigroup Research analyst, stated in a report that the political deadlock following Israel's election "has exacerbated uncertainty at a particularly sensitive moment for US-Israel-Iran relations and has also increased the risk of renewed military conflict." He pointed out that if the situation escalates again, the geopolitical risk premium may rise further; if credible progress is made towards reaching an agreement, the existing risk premium could partially subside. He stated: "The results of this election have not changed our fundamental view that an agreement will be reached through negotiations by the end of the year, but they have increased the probability of a more turbulent and potentially disruptive development."