Investing.com — Oil prices rose sharply on Monday, driving recent gains on fears of a broader war in the Middle East.
At 08:20 ET (12:20 GMT), the price rose 1.7% to $79.39 per barrel and rose 1.9% to $75.78 per barrel.
Both contracts rose between 8% and 10% last week as increased tensions in the Middle East were fueled by positive US payroll data, which raised hopes that the US economy was more resilient than initially feared.
Still, trading volumes were somewhat limited due to the golden week holidays in China. The Chinese markets will reopen on Tuesday.
Supply disruptions in focus on the 1-year anniversary of the war between Israel and Hamas
Oil bulls built on expectations of supply disruptions in the Middle East as the war between Israel and Hamas showed little sign of easing. Monday marked one year since Hamas’ attack on Israel sparked new hostilities between the two.
Reports on Monday said Hezbollah rockets had hit Israel’s third largest city, Haifa.
Israel struck Hezbollah targets in Lebanon and the Gaza Strip on Sunday, days after Iran launched a large-scale rocket attack on Israel over its activities against Hezbollah and Hamas.
According to reports, Israel was considering an attack on Iran’s oil production facilities – a move that could disrupt oil supplies and mark a drastic escalation of the conflict.
Demand signals and interest rates remain in focus
Oil markets remained focused on more signals on demand, especially after top importer China announced a slew of stimulus measures in recent weeks.
Positive US labor market data also contributed to some optimism about demand among the world’s largest fuel consumer. But the reading led to sharp gains in the dollar, which in turn weighed on crude prices.
peak possible – BCA
According to analysts at BCA Research, the risks of a spike in crude oil prices have increased.
While BCA maintains cyclical expectations that crude oil prices are likely to weaken over the next six to nine months, the immediate market environment is fraught with uncertainties that could support higher prices in the near term.
Geopolitical tensions, especially the escalating conflict in the Middle East, are creating supply-side risks that have alerted market participants to the possibility of a supply shock.
This potential disruption comes at a time when the region is responsible for a substantial portion of global crude oil production, raising alarm over the possibility that its infrastructure will be targeted by future retaliatory attacks.
Despite these concerns, BCA Research notes that there is still sufficient spare capacity within the OPEC+ bloc to absorb any temporary supply shocks.
Major OPEC+ producers have held back significant production and may be willing to intervene and increase production to stabilize the market.
The group kept production unchanged at a meeting last week, but also reiterated plans to increase production from December.
(Ambar Warrick contributed to this article.)
