Investing.com–Oil prices rose Thursday after Israel escalated its rhetoric against Iran, raising the possibility of supply from the oil-rich region.
At 08:25 ET (12:25 GMT), the price rose 0.6% to $75.44 per barrel, while it rose 0.7% to $71.26 per barrel.
Israel’s Defense Minister praises the attack on Iran
Traders braced for an escalation of the conflict in the Middle East after Israeli Defense Minister Yoav Gallant told air crews that the world would understand Israel’s strength after attacking Iran.
His comments were made against the backdrop of growing expectations of an attack on Iran in retaliation for the October 1 attack, Tehran’s second major attack on Israel in six months.
Fears of an escalation of the conflict have been a key driver of oil prices in recent months, with traders placing a risk premium on crude amid fears that Israel could attack Iran’s oil and nuclear infrastructure.
Israel also stepped up its offensive against Hamas and Hezbollah this week, prompting retaliation from the two military groups.
The escalation of the conflict comes despite increased pressure from the US to broker peace in the Middle East before the November 5 presidential elections.
PMIs in focus
Crude oil prices saw two weeks of steep losses amid increased concerns about slowing demand.
These concerns were heightened after data showed that business activity in the euro zone remained in contraction territory as domestic and international demand fell despite companies barely raising prices.
The preliminary composite Purchasing Managers’ Index for the Eurozone, compiled by S&P Global, rose to 49.7 in October from 49.6 in September, but remained below the 50 mark for the second month in a row, reflecting growth in shrinkage separates.
Business activity in Germany, Europe’s largest economy, shrank in October, but less sharply than in September, while France’s dominant services sector shrank at its sharpest pace in seven months, hit by sluggish new orders.
The PMI for Britain, outside the European Union, showed businesses reporting the slowest growth in 11 months.
expected later in the session is expected to be supported by strength in the services sector.
Any further signs of resilience in the US economy are likely to lead to further bets on a slower pace of rate cuts by the Federal Reserve – an idea that has dented oil markets in recent weeks.
Rough to descend further – Macquarie
Prices have been losing for three months and are likely to continue falling until the end of the year, Macquarie analysts said, as weak supply and demand fundamentals are likely to continue to benefit from any boost from geopolitical pressure in the Middle East East or stimulus measures from China.
“[W]We expect a decline in crude oil prices through FY24 as bearish fundamentals outweigh geopolitical factors,” Macquarie analysts said in a recent note.
The supply and demand outlook is at the heart of the weak fundamentals putting pressure on oil prices. Analysts expect a recovery in growth in the fourth quarter, driven by US production growth and the return of OPEC+ barrels at a time when oil demand growth is falling below 1 million barrels per day.
U.S. inventory data showed a bigger-than-expected increase, according to official data released Wednesday.
(Ambar Warrick contributed to this article.)
