Oil Prices Settle Higher Amid Geopolitical Tensions

Oil prices rose on Monday, driven by diminishing concerns over the U.S. economy and ongoing geopolitical tensions in the Middle East, which countered a weak global demand outlook.

At 14:30 ET (18:30 GMT), West Texas Intermediate crude futures increased by 3.8%, reaching $80.86 a barrel, while Brent oil futures rose by 2.9% to $81.92 a barrel.

Fears of an Imminent Iranian Response to Israel

Increasing geopolitical tensions have raised fears of supply disruptions in the Middle East. There are concerns that Iran might retaliate against Israel following the assassination of a senior Hamas leader in Tehran.

In response, the U.S. has deployed fighter jets and navy warships to the region to support Israel’s defense capabilities against potential attacks. Reports suggest that Israeli intelligence anticipates a direct Iranian attack within days.

Awaiting Inflation Readings This Week

Recent positive economic data from the U.S. has buoyed market sentiment, marking the fifth consecutive day of gains as traders reassess fears of a U.S. recession.

Key inflation data from major economies, particularly the U.S., is expected this week. The U.S. consumer price index (CPI) due on Wednesday is projected to show a decline in inflation through July, which may support expectations for interest rate cuts in September. Earlier on Monday, CPI data from India indicated a slight slowdown, while the UK CPI is also due Wednesday.

Prior to last week, oil prices had faced four consecutive weeks of losses stemming from concerns over slowing economic growth in major oil consumers, notably the U.S. and China.

OPEC Cuts 2024 Crude Demand Growth Forecast

Monday’s gains occurred despite OPEC’s decision to lower its global oil demand growth forecast for 2024, citing weak demand from China, the world’s largest crude importer.

In its monthly report, OPEC announced that global oil demand will increase by 2.11 million barrels per day in 2024, down from a previously expected growth of 2.25 million bpd. This revision is based on actual data from Q1 2024 and projections for Q2, along with a decrease in expectations for China’s oil demand growth.

Despite a slow start to the summer driving season compared to the prior year, demand for transport fuel is expected to remain strong due to healthy road and air mobility.

This marks the first reduction in OPEC’s 2024 forecast since its introduction in July 2023. The International Energy Agency (IEA) will also release its monthly report this week, which is typically more bearish than OPEC’s outlook, projecting a demand growth of 970,000 bpd in its last report.

*(Peter Nurse, Ambar Warrick contributed to this article.)