LONDON: Oil prices increased by 1% on Monday, driven by concerns that the escalating conflict in Gaza could disrupt regional oil supplies. This follows gains from Friday, when expectations of US interest rate cuts boosted the global economic outlook and fuel demand.
Brent crude futures rose 79 cents, or 1%, to $79.81 per barrel by 0910 GMT, while US crude futures climbed 80 cents, or 1.07%, to $75.63 per barrel.
Over the weekend, Hezbollah launched hundreds of rockets and drones into Israel, leading to one of the largest border clashes in over 10 months. Israel responded with airstrikes in Lebanon, raising fears that the Gaza conflict could escalate into a broader regional war involving Iran and the United States. Despite these tensions, no oil output has been affected so far.
“Oil prices are up due to the weekend’s clashes, though the situation has calmed, limiting further gains,” noted Commerzbank analyst Carsten Fritsch.
On Friday, oil prices surged over 2% after US Federal Reserve Chair Jerome Powell signaled the start of interest rate cuts, boosting market sentiment. Analysts from ANZ highlighted that easing monetary policy had a positive impact across the commodity sector.
Investors remain wary of OPEC and its allies, known as OPEC+, which plan to increase output later this year. Priyanka Sachdeva, a senior market analyst at Phillip Nova, mentioned that OPEC recently downgraded its global oil demand outlook due to weak demand in China. She also noted that strong US demand and the refilling of the Strategic Petroleum Reserve (SPR) are currently supporting oil prices amid concerns about excess OPEC supply.
Saxo Bank analyst Ole Hansen suggested that if OPEC+ delays the planned production increase in October, it could provide short-term support for oil prices.
