Oil prices continued to rise on Monday, with Brent crude nearing the $80 mark, driven by concerns over escalating Middle East tensions and the potential impact on global oil supply. Brent crude futures rose by $1.09, or 1.4%, reaching $79.14 a barrel by early afternoon , while U.S. West Texas Intermediate (WTI) crude increased by $1.15, or 1.55%, to $75.53 a barrel, following an initial gain of more than $2. Last week, Brent surged over 8% and WTI climbed 9.1%, marking their steepest weekly rise since early 2023.
The recent spike in oil prices is influenced by fears that the ongoing conflict could extend to a broader regional war, disrupting oil exports from the Middle East. Ole Hansen, Saxo Bank’s head of commodity strategy, noted increased hedging activity in the options market, indicating heightened demand amid fears of supply disruption. Speculation also arose about the possibility of Israel targeting Iranian oil infrastructure in retaliation for Iran’s missile strike on Israel earlier this month, adding to the uncertainty around oil supply stability.
Escalating violence has raised concerns about broader U.S. involvement in the Middle East, with Iran-backed Hezbollah launching rockets at Israel’s city of Haifa. Israel, in response, is preparing to intensify ground operations in southern Lebanon, marking the anniversary of the Gaza conflict, which has amplified unrest across the region. Experts caution that while Israel directly targeting Iran’s oil facilities remains unlikely, the potential for escalation remains a significant factor impacting oil market sentiment.
OPEC and its allies, known as OPEC+, plan to increase production in December after recent output cuts aimed at supporting prices amid global demand concerns. Analysts believe OPEC+ has sufficient spare capacity, around 7 million barrels per day, to offset any immediate shortfall in Iranian supply if needed. However, any further regional escalation—especially if Iran retaliates by targeting oil installations in neighboring Gulf states—could pose challenges, adding complexity to global supply dynamics amidst the continuing geopolitical volatility.
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