Oil prices continue to rise amid concerns of escalating conflict in the Middle East
Oil prices extended their gains on Monday, with Brent crude nearing $80 a barrel, following last week’s sharpest weekly surge since early 2023. This rise is fueled by concerns over escalating Middle East tensions and the potential disruption of oil exports from the region.
By 1316 GMT, Brent crude futures had increased by $1.09, or 1.4%, reaching $79.14 a barrel. U.S. West Texas Intermediate (WTI) crude futures climbed by $1.15, or 1.55%, to $75.53, after previously surging by more than $2.
“Brent crude is once again approaching $80, with activity in the options market reflecting heightened demand for hedging against the risk of further price increases due to concerns over potential minor or significant supply disruptions from the Middle East,” said Ole Hansen, head of commodity strategy at Saxo Bank.
Brent surged over 8% last week, while WTI jumped 9.1%, amid speculation that Israel could target Iranian oil infrastructure in response to Iran’s October 1 missile strike on Israel.
Early Monday, rockets fired by Iran-backed Hezbollah hit Haifa, Israel’s third-largest city. Meanwhile, Israel appeared set to intensify ground incursions into southern Lebanon on the anniversary of the Gaza war, which has further escalated tensions across the region.
This escalation has heightened fears of a broader conflict potentially drawing in the U.S., Israel’s key ally, and Iran, its adversary.
ANZ Research, however, believes the immediate impact on oil supply could be minimal. “A direct attack on Iran’s oil facilities seems the least likely option among Israel’s potential responses,” the firm stated, pointing to the 7 million barrels per day of spare capacity held by OPEC.
OPEC and its allies, known as OPEC+, are set to gradually increase production starting in December after years of cuts intended to support prices weakened by sluggish global demand.
Although OPEC+ has sufficient spare capacity to offset the loss of Iranian supply, analysts warn that retaliation by Iran against neighboring Gulf nations’ oil infrastructure could severely strain global supply.
At the onset of the Middle East conflict a year ago, Brent was priced at $88.15 a barrel.
“While the emotional impact of the conflict on the oil market is significant, it has been largely overshadowed by macroeconomic factors that have dampened any expectations of a substantial rise in global demand,” said John Evans of oil broker PVM.
