Oil Prices Surge 2 Percent Amidst Rising Tensions in Middle East
LONDON: In a dramatic turn of events, oil prices surged by 2 percent on Friday following reports of Iran’s potential retaliatory strike on Israel from Iraq in the near future. Despite this spike, benchmarks were still poised for a weekly decline.
Brent crude futures saw a $1.46 increase, or 2 percent, reaching $74.27 a barrel by 3:52 p.m. Saudi time. US West Texas Intermediate crude also rose by $1.57, or 2.3 percent, hitting $70.83.
Escalating Tensions
According to US news website Axios, Israeli intelligence sources have indicated that Iran may be gearing up to launch an attack on Israel from Iraq within days. This development has raised concerns and tensions in the region.
“Any additional responses from Iran might remain restrained, similar to Israel’s limited strike last weekend, hence primarily intended as a demonstration of strength rather than an invitation to open warfare,” commented SEB Research analyst Ole Hvalbye.
The escalating conflict between the two countries has resulted in a series of retaliatory strikes within the broader Middle East theater, stemming from the ongoing fighting in Gaza. Previous Iranian air assaults on Israel have been mostly thwarted, with minimal damage inflicted.
Market Impact
Despite the recent surge, Brent is expected to conclude the week with a nearly 2 percent decline, largely attributed to the 6 percent drop on Monday following Israel’s strike against Iran on Oct. 26, which bypassed key oil and nuclear facilities.
Anticipation surrounding a potential delay in December’s planned increase to oil production by OPEC+ has also provided support to oil prices. Concerns over soft oil demand and increasing supply may prompt a decision on postponement as early as next week.
Upcoming Influences
The outcome of the upcoming US presidential election and any stimulus announcements from China’s NPC standing committee meeting will play a crucial role in determining future oil prices, noted IG analyst Tony Sycamore.
US presidential candidates Kamala Harris and Donald Trump have differing stances on policies regarding oil producers Iran and Russia, adding another layer of uncertainty to the market.
Amidst these geopolitical tensions, a private-sector survey in China revealed a rebound in manufacturing activity in October, indicating that stimulus measures are beginning to take effect. However, analysts caution that the growth may be more domestic-focused compared to pre-COVID times.
Lastly, US employment data released on Friday had minimal impact on oil prices. While job growth slowed in October due to disruptions from hurricanes and strikes, the unemployment rate remained steady at 4.1 percent, suggesting a stable labor market ahead of the upcoming presidential election.