Oil Prices Surge Amid Middle Eastern Tensions

By Laila Kearney

NEW YORK (Reuters) – Oil prices jumped by more than 3% on Monday, marking a fifth consecutive session of gains due to concerns over escalating conflicts in the Middle East that could impact global crude oil supplies.

Global benchmark Brent crude futures increased to $82.30 a barrel, up $2.64 or 3.3%. U.S. West Texas Intermediate crude futures settled at $80.06 a barrel, gaining $3.22 or 4.2%. Brent experienced its largest percentage gain for a single trading session this year.

The U.S. Defense Department announced it will send a guided missile submarine to the Middle East, anticipating potential attacks on Israel by Iran and its allies.

Bob Yawger, director of energy futures at Mizuho, noted, “We’re piling assets one on top of the other and giving the impression that, if this turns hot, it could also turn ugly.”

Both Iran and Hezbollah have pledged to retaliate for the assassinations of Hamas leader Ismail Haniyeh and Hezbollah military commander Fuad Shukr. Such retaliation could escalate the conflict in the Middle East, tighten global crude supplies and increase prices.

An attack might prompt the United States to impose embargoes on Iranian crude exports, potentially affecting 1.5 million barrels per day of supply, according to Yawger.

Meanwhile, Israeli forces continued operations near Khan Younis after an airstrike over the weekend killed at least 90 people. The Gaza Civil Emergency Service reported the death toll, while Israel claimed it was exaggerated. Hamas expressed doubts about participating in new ceasefire talks on Sunday.

John Kilduff, a partner at Again Capital in New York, mentioned, “The market is increasingly concerned about a region-wide conflict there,” indicating that an expanding war could lead Israel to target Iranian oil and disrupt production from other key producers like Iraq.

Last week, Brent gained 3.7%, while WTI rose 4.5%, buoyed by stronger-than-expected U.S. jobs data, which raised hopes for an interest-rate cut in the U.S., the world’s largest crude oil consumer.

IG Markets analyst Tony Sycamore stated, “Support is coming from last week’s better-than-expected U.S. data, which eased fears of a U.S. recession.”

Three U.S. central bankers suggested last week that inflation is cooling enough that the Federal Reserve might cut interest rates as soon as next month. Such cuts typically stimulate economic activity, increasing demand for energy resources, including oil.

Investors are now looking ahead to the U.S. consumer price index data for July, set to be released on Wednesday. It is anticipated to show month-on-month inflation rising to 0.2% after June’s reading of -0.1%.

Additionally, oil prices found support as consumer prices in China, the largest global oil importer, rose faster than anticipated in July.

On Monday, Russia started evacuating civilians from parts of a second region near Ukraine after Kyiv increased military actions along the border, just days following its largest incursion into Russian territory since the onset of the war in 2022.