Oil Prices Surge After Hamas' Attack On Israel Spur Tensions In Middle East
Oil surged 5 per cent as a result of Hamas' surprise attacks over the weekend. West Texas Intermediate traded near $87 a barrel as a war-risk premium returned to markets.
The attack may not pose an immediate threat to oil supply, however, there is a risk that the conflict can spiral into a proxy war, embroiling the US and Iran, Bloomberg reported.
“Key for markets is whether the conflict remains contained or spreads to involve other regions, particularly Saudi Arabia,” ANZ Group Holdings Ltd analysts Brian Martin and Daniel Hynes said in a note. “Initially at least, it seems markets will assume the situation will remain limited in scope, duration, and oil-price consequences. But higher volatility can be expected.”
Global benchmark Brent futures and WTI had dropped by around $10 a barrel this month on worries of high interest rates and slowdown in growth clouding the demand outlook.
The fears overshadowed bullishness that resulted in a sharp rally in the third quarter as physical balances tightened due to prolonged crude output cuts led by Saudi Arabia.
The war between Israel and Hamas reduces expectations of Saudi Arabia eliminating its 1 million-barrels-a-day of output curbs, Citigroup analysts Ed Morse and Eric Lee said in a note. Risks are also growing that Israel will attack Iran, they said.
The attacks come after months of easing tension between Washington and Tehran, with crude shipments from Iran rebounding to a five-year high with America’s tacit blessing.
The latest events were also reflected in oil’s futures curve, although the moves were not dramatic. WTI’s prompt timespread moved backwards to $1.68 a barrel.