During Asian trading on Thursday, oil prices increased, building on gains from the previous session. This rise was fueled by concerns about a potential escalation in Middle Eastern conflicts following the assassination of a Hamas leader in Iran, which could impact oil supply.
Brent crude futures, the global benchmark, rose by 71 cents, or 0.9%, to reach $81.55 a barrel by 0605 GMT. Meanwhile, U.S. West Texas Intermediate (WTI) crude futures climbed 76 cents, or 1%, to $78.67 a barrel. Both benchmarks had jumped about 4% in the prior session.
The assassination of Hamas leader Ismail Haniyeh in Tehran on Wednesday followed the death of a senior Hezbollah military commander in an Israeli strike in Beirut, intensifying fears that the ongoing 10-month war in Gaza could expand into a broader Middle East conflict, potentially disrupting oil supplies from the region.
“Oil markets are understandably concerned that Haniyeh’s assassination may draw Iran more directly into the conflict with Israel, potentially jeopardizing Iran’s oil supply and infrastructure,” said analyst Vivek Dhar of the Commonwealth Bank of Australia in a note to clients.
Dhar highlighted the risk posed by Iran’s ability to escalate tensions via its control over the Strait of Hormuz, a vital waterway for oil transport. “A blockade of this crucial passage threatens the movement of 15-20% of the world’s oil supply. With limited alternative pipeline capacity, the Strait of Hormuz poses a significant potential disruption risk for oil markets,” he explained.
Additionally, oil prices were supported by U.S. data releases and a weaker dollar. Strong export demand led to a 3.4 million barrel decline in U.S. crude oil stockpiles to 433 million barrels for the week ending July 26, according to the U.S. Energy Information Administration (EIA) data released on Wednesday.
The U.S. dollar index continued its decline on Thursday after the Federal Reserve maintained interest rates but left open the possibility of a rate cut in September. A weaker dollar can increase oil demand from investors holding other currencies.
In the longer term, however, concerns over Chinese demand remain, as noted by Phillip Nova analyst Priyanka Sachdeva, which may continue to limit upward pressure on oil prices. Official data from China on Wednesday showed manufacturing activity fell to a five-month low in July due to declining new orders and low prices. A private survey on Thursday also indicated that China’s manufacturing activity contracted for the first time in nine months, as new orders decreased.
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