Oil prices surged by more than 2% on Monday, marking their fifth consecutive session of gains, driven by escalating tensions in the Middle East that could potentially tighten global crude oil supplies.
By 16:58 GMT, Brent crude futures had risen $1.81, or 2.3%, to $81.47 per barrel, while U.S. West Texas Intermediate (WTI) crude futures increased by $2.21, or 2.9%, to $79.05 per barrel.
The U.S. Defense Department announced over the weekend that it would deploy a guided missile submarine to the Middle East as the region prepares for potential attacks on Israel by Iran and its allies.
“We’re adding more military assets to the region, creating the perception that if this situation escalates, it could become significantly more severe,” said Bob Yawger, director of energy futures at Mizuho in New York.
Iran and Hezbollah have vowed to retaliate for the assassinations of Hamas leader Ismail Haniyeh and Hezbollah military commander Fuad Shukr. Such an attack could broaden the Middle Eastern conflict, further restricting access to global crude supplies and driving up prices.
Yawger noted that an assault could lead the United States to impose embargos on Iranian crude exports, potentially removing 1.5 million barrels per day from the global supply.
Meanwhile, Israeli forces continued operations near the southern Gaza city of Khan Younis on Monday following a weekend airstrike on a school compound that killed at least 90 people, according to the Gaza Civil Emergency Service. Israel disputed the death toll, while Hamas expressed doubts about participating in new ceasefire talks on Sunday.
“We anticipate higher prices this week, with crude benchmarks potentially advancing by around $3 per barrel,” oil analyst Jim Ritterbusch of Ritterbusch and Associates in Florida stated in a note.
Brent crude gained 3.7% last week, while WTI increased by 4.5%, buoyed by stronger-than-expected U.S. jobs data that fueled hopes for an interest rate cut in the world’s largest crude oil consumer.
“Support is coming from last week’s better-than-expected U.S. economic data, which eased fears of a U.S. recession,” said Tony Sycamore, an analyst at IG markets.
Three U.S. central bankers indicated last week that inflation appeared to be cooling enough for the Federal Reserve to consider cutting interest rates as early as next month.
Rate cuts typically stimulate economic activity, leading to increased demand for energy sources such as oil.
Investors are now focusing on U.S. consumer price index data for July, set to be released on Wednesday, which is expected to show a slight month-on-month inflation increase to 0.2% following a -0.1% reading in June.
Oil prices also received a boost when consumer prices in China, the world’s largest oil importer, rose faster than expected in July.
In a related development, Russia began evacuating civilians from parts of a second region near the Ukrainian border on Monday, following an increase in military activity by Kyiv. This comes just days after Ukraine’s largest incursion into Russian territory since the war began in 2022.
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