Global oil prices are poised for a second consecutive week of losses as the Israel-Hamas conflict continues to unfold and demand uncertainties loom on the horizon. The benchmark Brent crude is currently hovering around $87 per barrel, following a 2.6% surge on Thursday attributed to a weakened U.S. dollar and indications from the Federal Reserve suggesting a halt in tightening measures.
Market observers are closely monitoring the evolving situation, as the Israel Defense Forces have encircled Gaza City and U.S. President’s call for a ceasefire. Nevertheless, tensions persist with Iran-backed Houthi rebels launching rockets and drones towards Israel, and clashes between Saudi Arabia and the militant group. Vivek Dhar, an analyst at Commonwealth Bank of Australia, remarked, “The fact that Israel’s ground invasion of Gaza has commenced without expanding the Israel‑Hamas war has given hope that disruptions to oil supply and trade can be avoided.” Dhar cautioned, however, that “any direct involvement of Iran in the Israel‑Hamas war will initially take Brent oil futures to $100 a barrel.”
Despite concerns over potential disruptions to the oil supply from the region, the war premium associated with crude has been diminishing due to decreasing apprehensions. Worries about demand resurfaced as factory activity in China decelerated and U.S. crude stockpiles registered an increase. As the conflict unfolds, investors remain on edge, eagerly awaiting the next developments and keeping a vigilant eye out for indications of a resurgence in demand.
Oil prices are grappling with consecutive weeks of losses, reflecting the delicate balance between geopolitical tensions and evolving market dynamics. The situation in the Middle East remains fluid, with geopolitical dynamics playing a significant role in influencing oil markets.
The coming days will be critical in determining the impact of the ongoing conflict on global oil prices and the broader energy sector. Market participants will be closely monitoring both the ground situation in the region and any signals regarding shifts in demand patterns.
Source: Bloomberg
