Oil prices increased on Monday due to concerns that escalating conflict in the Middle East, particularly between Israel and Hezbollah, could disrupt regional oil supplies. Additionally, anticipation of imminent U.S. interest rate cuts has bolstered the global economic and fuel demand outlook.
Brent crude futures rose by 37 cents, or 0.5%, to $79.39 per barrel, while U.S. crude futures increased by 36 cents, or 0.5%, reaching $75.19 per barrel by 2300 GMT. The price surge follows a weekend of intense conflict, where Hezbollah launched hundreds of rockets and drones into Israel, prompting retaliatory strikes by the Israeli military in Lebanon.
The ongoing Gaza conflict has heightened fears that it could escalate into a broader regional confrontation involving Iran and the U.S., potentially disrupting oil supplies. IG analyst Tony Sycamore noted that Israel’s pre-emptive strikes could strengthen oil prices, with West Texas Intermediate (WTI) crude potentially rallying towards $77.50 before approaching $80.00.
Oil prices also benefited from comments by U.S. Federal Reserve Chair Jerome Powell, who indicated that interest rate cuts could be on the horizon. This sentiment has positively impacted the commodity markets, with oil benchmarks gaining more than 2% on Friday. ANZ analysts expect the Fed to implement a series of gradual rate cuts, which could further support oil prices.
Despite these gains, oil prices experienced declines last week due to a weakening outlook for major economies, which has dampened fuel demand. In response to market conditions, the U.S. Energy Department recently purchased nearly 2.5 million barrels of oil to replenish the Strategic Petroleum Reserve. Meanwhile, the number of operating U.S. oil rigs remained steady at 483, according to Baker Hughes.
