Global Tensions Spark Oil Price Surge Amid Fears of Supply Disruptions
Oil prices surged on Monday, driven by escalating concerns over potential supply pressures from key Middle East producers. The region is on high alert following Israel’s intensified attacks on Iranian-backed forces, sparking fears of a widening conflict that could disrupt oil supplies.
Brent crude futures rose 0.71% to $72.49 a barrel, while U.S. West Texas Intermediate crude futures gained 0.63% to $68.61 a barrel. The price increase comes after a tumultuous week that saw Brent fall 3% and WTI plummet 5% due to demand worries.
However, the possibility of a deepening Middle East crisis has shifted market sentiment, with analysts warning of potential supply disruptions from key producing regions. “The threat of an escalating conflict in the Middle East is a major concern for oil markets, which are already grappling with excessive supplies,” said Priyanka Sachdeva, senior market analyst at Phillip Nova.
Israel’s recent strikes on Houthi targets in Yemen and Hezbollah leader Sayyed Hassan Nasrallah in Lebanon have raised the stakes, prompting the U.S. Defence Secretary to authorize military reinforcements in the region. The Pentagon has warned that it will take “every necessary measure” to defend U.S. personnel and interests if Iran or its allies target them.
As the situation unfolds, oil prices will continue to be driven by supply and demand dynamics, according to Tony Sycamore, market analyst at IG. With OPEC+’s voluntary supply cuts set to expire on December 1, WTI prices may test their 2021 lows in the $61 to $62 a barrel range.
Meanwhile, markets are eagerly awaiting clues on the Federal Reserve’s monetary easing policy, with Chair Jerome Powell set to speak on Monday. Data on job openings, private hiring, and ISM surveys on manufacturing and services will also be closely watched.
Despite the uncertainty, some analysts believe that economic recovery may be on the horizon, driven by policy easing from central banks and potential demand revival in China. “The key question is how well demand responds to easing rates and how much Chinese demand revives after last week’s stimulus,” said Sachdeva. “This will ultimately shape oil market dynamics going forward.”
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