War in the Middle East usually makes oil prices spike. Why isn't that happening now?

ARI SHAPIRO, HOST:

The day before Hamas attacked Israel, oil was around $83 a barrel. Today, it's below $75. Usually, when there's a war in the Middle East, oil prices shoot up. So why isn't that happening now? Our colleagues Darian Woods and Wailin Wong at The Indicator From Planet Money explain.

DARIAN WOODS, BYLINE: The Hamas attacks in Israel on October 7 were 50 years, almost to the day, from the Yom Kippur War, when Syria and Egypt attacked Israel.

(SOUNDBITE OF ARCHIVED RECORDING)

TOM BROKAW: Surprise attacks came early this morning.

WAILIN WONG, BYLINE: And it's that war that led to enormous repercussions throughout the global economy.

WOODS: The Yom Kippur War was a conflict between Arab states and Israel over territory that Israel seized during an earlier conflict known as the Six-Day War. And in response to countries that supported Israel, Saudi Arabia and other Arab states declared an oil embargo. Yet this time, Arab and Gulf states haven't imposed an oil embargo. Making sense of this is Richard Bronze. Richard is an expert on how geopolitics affects oil markets.

RICHARD BRONZE: I think it's extremely unlikely we get anything on the scale of the 1970s oil embargoes. We have seen Iran making some calls for an oil embargo, but that hasn't been picked up by other Middle Eastern producers or other members of OPEC more widely, and I don't think it will be.

WONG: Richard says there were other factors going on back in the 1970s, like Middle Eastern countries trying to wrest back control of their own oil fields after decades of Western companies owning them. Also, Western countries like the U.S. were much more dependent on Middle Eastern oil for their economies in ways that are not so acute today. Fracking, for example, means a lot of oil production happens here in the U.S. Plus, we now rely on more alternative sources of energy.

WOODS: But what about just general disruption and chaos in the Middle East? The region is critical to global oil supplies, even though Israel and Gaza are not major producers.

BRONZE: They're surrounded by a lot of very important oil producers, and a lot of the world's oil moves through places like the Strait of Hormuz, off the coast of Iran, through the Suez Canal. So there's lots of ways you can be worried about the potential for spillover to disrupt oil supply, but we haven't seen it yet.

WONG: And that brings us to the second reason for lower oil prices, which is that oil traders don't seem to think there will be a regional war spilling outside the borders of Israel and Gaza.

BRONZE: Some of the early concerns that might happen have diminished.

WONG: Meanwhile, supply and demand seem to be in balance around the world. This then raises the question of whether the oil market is telling us something, maybe, a little encouraging about the future.

WOODS: Do these numbers from the oil market give you some comfort about lower probability of a bigger regional war?

BRONZE: The oil market might be moving very quickly to an assumption that because we haven't seen an escalation or a spread of the fighting yet that it probably won't happen, but I don't think we should take that as a guarantee just yet.

WONG: In other words, oil traders might be poring over political statements and scenarios. But just like the rest of us, they don't have a crystal ball into how this terrible war might unfold.

WOODS: Darian Woods.

WONG: Wailin Wong, NPR News. Transcript provided by NPR, Copyright NPR.