By Laila Kearney
NEW YORK (Reuters) -Oil fell almost 2% on Monday as Israeli officials said they wanted to avoid dragging the Middle East into all-out war as they responded to a deadly rocket attack on the Israeli-occupied Golan Heights this weekend.
futures settled at $79.78 a barrel and fell $1.35, 1.7%. futures ended down $1.35, or 1.8%, at $75.81 a barrel.
Two Israeli officials told Reuters on Monday that Israel wanted to hurt the Iran-backed Lebanese group Hezbollah, which the country blames for Saturday’s attack that killed 12 children and teenagers, without sparking a wider conflict.
“It appears the market has come around to the idea that, as horrific as these events are, they are unlikely to trigger a region-wide conflict,” said John Kilduff, partner at Again Capital in New York.
On Sunday, Israel’s security cabinet authorized Prime Minister Benjamin Netanyahu’s government to decide the “manner and timing” of a response to the attack on a sports field.
Israel has vowed retaliation in Lebanon against Iran-backed Hezbollah, which denied responsibility for the attack. Israeli planes hit targets in southern Lebanon on Sunday.
The tensions raised concerns among investors about the potential impact on crude output in the world’s largest oil-producing region, but so far output has not been affected.
“Despite renewed geopolitical tensions in the Middle East, the absence of any supply disruption limits any positive price reaction,” said UBS analyst Giovanni Staunovo.
Brent and US crude lost 1.8% and 3.7% respectively last week on declining Chinese demand and hopes for a ceasefire in Gaza.
“China’s economic problems are also sucking the juice out of the oil market,” said Bob Yawger, director of energy futures at Mizuho in New York.
Data released this month showed China’s total fuel oil imports fell 11% in the first half of 2024, raising concerns about the broader demand outlook at the world’s largest crude oil importer.
Prices also fell late last week on news that Nigeria’s huge Dangote oil refinery is reselling cargoes of US and Nigerian crude after technical problems at the plant.
Meanwhile, markets are watching oil producer Venezuela after the country’s election authority said President Nicolas Maduro had won a third term with 51% of the vote, despite multiple exit polls pointing to an opposition victory.
The US had previously said it would “calibrate” its sanctions policy on Venezuela depending on how the elections unfold in the OPEC country.
