MoritzLudwig

Despite our different rationales, my conversation with a fellow forecaster did not change my assessment about this question. While I had raised my forecast by 5%, the other forecaster lowered his by 13%. We now have roughly the same numbers. While the main reason for my adjustment was the cyberattack on the Iranian ship, the fellow forecaster took the apparent reluctance of the U.S. to attack Iran directly as a reason to lower his prediction. 

Talking with a fellow forecaster, I noticed that we share the same skepticism about the success of the current ceasefire negotiations and the same pessimism about a 30 day pause in the near future. Since the time period is so big, however, we both consider it more likely than not that at some point in 2024 there will be a pause in the Israel-Hamas war. I slightly adjusted my forecast down again. 

After consulting with a fellow forecaster, I feel even more confident of the price of oil staying below $90, as we both consider this option more than 75% likely. Thus, I raise the likelihood for the first category even a little more. 

The U.S. revealed that it conducted a cyberattack against an Iranian military ship as a response to the killing of three U.S. troops in Iraq by Iranian-backed forces (https://www.nbcnews.com/news/investigations/us-conducted-cyberattack-suspected-iranian-spy-ship-rcna138638). This could indicate that the U.S. has the capability to attack Iranian military targets via cyber and is willing to retaliate should tensions escalate further.

As Iranian-backed Houti attacks in the Red Sea continue to intensify (https://www.iranintl.com/en/202402240295), pressure rises. There also were attacks on Iranian gas pipelines in the past week for which Iran accused Israel of the action (https://www.aljazeera.com/news/2024/2/21/iran-says-israel-behind-attacks-on-gas-pipelines).

Mutliple sources report that the U.S. will impose new sanctions on Iran, as the Islamic Republic sent ballistic missiles to Russia, which Iran denies (https://www.hindustantimes.com/world-news/us-to-impose-new-sanctions-on-iran-over-support-for-russia-white-house-101708628603182.html, https://www.voanews.com/a/iran-denies-providing-ballistic-missiles-to-russia-/7500448.html). Iran’s mission to the UN claimed on X that the country is morally obligated to refrain from weapon transactions during the Russia-Ukraine conflict (https://www.jpost.com/breaking-news/article-788546).

All of these developments point toward an increased tension and demonstrate the willingness of both sides to use force against each other. As Ramadan approaches, events are likely to keep unfolding quickly. Thus, I adjusted my forecast by increasing the likelihood by 5%.

Yesterday, negotiations on a potential ceasefire in Gaza started in Paris with officials from Israel, the U.S., Egypt and Qatar (https://www.forbes.com/sites/siladityaray/2024/02/23/gaza-ceasefire-and-hostage-deal-talks-begin-in-paris-today-heres-what-to-know/?sh=792294f26a38). While I am skeptical about a successful deal without direct Palestinian involvement in the negotiations, it seems that Egypt negotiates on their behalf. In Cairo, Palestinian leadership met with Israeli officials and head of Egypt’s intelligence service for three days, to negotiate a ceasefire agreement which would involve hostage and prisoner exchanges preceeding the talks in Paris (https://www.aljazeera.com/news/liveblog/2024/2/23/israels-war-on-gaza-live-local-authorities-report-central-gaza-massacre?update=2727372).

Both Saudi and Israeli sources report a softening of Palestinian demands for a ceasefire deal (https://www.timesofisrael.com/liveblog_entry/hamas-said-to-no-longer-be-demanding-complete-idf-withdrawal-from-gaza-permanent-ceasefire-in-truce-talks/). However, the conditions of Hamas’ leadership seem, even if now softened, not compatible with Israel’s security concerns. A release of 500 Palestinian prisoners for every Israeli hostage seems very disproportionate (https://www.palestinechronicle.com/possible-breakthrough-abu-marzouk-discusses-chances-of-ceasefire/).

Furthermore, it does not seem like Netanyahu is very interested in a deal at the moment according to a senior U.S. diplomat (https://www.cnn.com/2024/02/21/politics/israel-hamas-negotiations-ramadan/index.html). The Israeli cabinet will decide on the IDF’s planned ground operation in Rafah with nearly 1.5 million civilians seeking shelter there in the next week (https://www.timesofisrael.com/liveblog_entry/netanyahu-idf-plans-for-rafah-operation-to-be-brought-to-cabinet-for-approval-next-week/).

Success thus hinges on the ceasefire talks in Paris and both side’s leadership to make concessions and find common ground. The start of Ramadan on March 10 might increase pressure for a successful deal, but it might also rush negotiators leading to an instable or failed compromise. In the past years, Ramadan has always lead to violent conflict between Israel and Palestine and I do believe that this year things could even be worse. Thus, I adjust my forecast by lowering the likelihood of a successful 30-day pause in the war.   

In the past 2 weeks, the Brent crude oil price remained relatively stable below $84 and now declined to $80.75 (https://www.marketwatch.com/investing/future/brn00?countrycode=uk). As our timeframe for the forecast narrows, the likelihood of the price going above $90 decreases.

Deutsche Bank expects the price of Brent crude oil to reach $88 at the end of the year (https://oilprice.com/Latest-Energy-News/World-News/Deutsche-Bank-Sees-Brent-Oil-Price-at-88-by-the-End-of-2024.html). This is consistent with my forecast. 

The EIA also expects the price of crude oil to stagnate due to OPEC+ production restraints (https://www.eia.gov/outlooks/steo/report/BTL/2024/01-brentprice/article.php). 

While the Middle East crisis does have an effect on oil prices, the reaction of the market is only moderate (https://www.reuters.com/markets/commodities/oil-prices-roughly-flat-unclear-demand-scenario-weighed-2024-02-16/). 

A comment from a forecaster on my last forecast mentioned, that oil prices react more to traders' expectations about the market in the future. As we approach the spring and no cold waves are currently expected, I see little reason for why the oil consumption in the U.S., as one of the biggest oil consumers, should rise significantly in the next month. 

While I previously reacted to the price increase in oil by lowering the likelihood of the first category, I readjusted this after talking with another forecaster. The current price of $82 can reasonably be a normal fluctuation of the price and needs not to be related to any political events. We both see it still rather unlikely that the barrel price will exceed $90. 

Furthermore, as another week of the observation period passed, the likelihood of the price surpassing the $90 threshold is also logically following lower.  

While Iran just celebrated the 45th anniversary of the Islamic Revolution with US flag burnings and anti-Israel chants (https://www.timesofisrael.com/liveblog_entry/burning-us-flags-and-chanting-death-to-israel-iran-marks-45-years-since-the-islamic-revolution/), the political leadership signaled no further will to escalate the conflict. 

Agreeing with another forecaster, I believe there to be no reason for adjusting my forecast as of right now. I still think it is unlikely that there will be a direct attack on Iran. 

After exchanging ideas with another forecaster, I noticed that we had adjusted our forecasts in different directions on the basis of similar sources. This confirms the ambiguity of last week's statements and events and I readjusted my forecast slightly.