Oil prices experienced a significant increase on Monday, climbing for the fifth consecutive session amid fears of a broader conflict in the Middle East that could disrupt global crude oil supplies.
Global benchmark Brent crude futures surged by $2.64, or 3.3%, to settle at $82.30 per barrel. U.S. West Texas Intermediate (WTI) crude futures rose by $3.22, or 4.2%, closing at $80.06 per barrel. This marks Brent’s largest percentage gain for a single trading session this year.
The spike in oil prices is driven by heightened geopolitical tensions. The U.S. Defense Department announced over the weekend that it would deploy a guided missile submarine to the Middle East in response to growing concerns about potential attacks on Israel by Iran and its allies. Bob Yawger, Director of Energy Futures at Mizuho in New York, commented, “We’re piling assets one on top of the other and giving the impression that, if this turns hot, it could also turn ugly.”
Iran and Hezbollah have pledged retaliation following the assassinations of Hamas leader Ismail Haniyeh and Hezbollah military commander Fuad Shukr. The potential for further escalation in the region could disrupt crude oil supplies, thereby pushing prices higher. Yawger also noted that such developments might lead the U.S. to impose embargoes on Iranian crude exports, which could impact 1.5 million barrels per day of supply.
In related developments, Israeli forces continued their operations near Khan Younis in southern Gaza following a weekend airstrike on a school compound that resulted in at least 90 fatalities, according to Gaza Civil Emergency Services. Israel has disputed the casualty figures, and Hamas has expressed skepticism about participating in new ceasefire talks.
John Kilduff, Partner at Again Capital in New York, highlighted the market’s growing concern over a potential regional conflict, stating that a broader war could prompt Israel to target Iranian oil and affect crude output from other key producers, including Iraq.
The recent price increase is also supported by positive U.S. economic data. Brent crude gained 3.7% last week, while WTI rose by 4.5%, buoyed by stronger-than-expected U.S. jobs data that spurred speculation of an interest rate cut in the U.S. The Federal Reserve’s potential rate cuts could stimulate economic activity and increase energy demand.
IG Markets analyst Tony Sycamore noted that “support is coming from last week’s better-than-expected U.S. data, which eased fears of a U.S. recession.” Additionally, three U.S. central bankers suggested last week that cooling inflation might prompt the Federal Reserve to cut interest rates as early as next month.
Oil prices also received a boost from faster-than-expected consumer price increases in China, the world’s largest oil importer. On Monday, Russia began evacuating civilians from parts of a second region near Ukraine, following increased military activity by Kyiv, adding to the geopolitical uncertainty affecting global markets.
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