By Erwin Seba
HOUSTON (Reuters) -Oil fell in volatile trading on Monday as a sell-off in global stock markets continued, but the decline was limited by fears that Iranian retaliation for the killing of a Hamas leader in Tehran could lead to a wider war in the Middle East.
futures fell 51 cents, or 0.66%, to $76.30 a barrel, with prices previously trading near their lowest levels since January. U.S. West Texas Intermediate crude fell 58 cents, or 0.79%, to $72.94.
Stock markets tumbled from Asia to North America as investors fled riskier assets, betting that rapid interest rate cuts by the Federal Reserve will be needed to boost U.S. economic growth.
“The stock market fell as Friday’s jobs report convinced the market that the Fed was once again falling behind,” Phil Flynn, senior analyst at Price Futures Group, wrote in a morning note.
Concerns about further possible supply disruptions due to a wider war in the Middle East limited oil losses during the day.
Israel and the US are bracing for a serious escalation in the region after Iran and its allies Hamas and Hezbollah vowed to take revenge on Israel for the killing of Hamas leader Ismail Haniyeh and a top Hezbollah military commander last week.
Oil traders expect Iran’s response to be short-lived, leaving crude futures more vulnerable to fears of a U.S. recession like the one that roiled markets on Monday, said John Kilduff, founder of Again Capital LLC.
“If this passes quickly, prices will join this huge, stringent party and prices will spiral out of control,” Kilduff said.
Falling diesel consumption in China, which is the world’s largest contributor to oil demand growth, is also weighing on oil.
