Oil Prices Surge Amid Rising Middle East Tensions
In a dramatic turn of events, oil prices soared in Asian trade on Thursday, building on gains from the previous session. The catalyst? The assassination of a Hamas leader in Iran, sparking fears of a broader conflict in the volatile Middle East region and its potential impact on oil supply.
Global benchmark Brent crude futures surged by 0.9 percent, climbing 71 cents to reach $81.55 a barrel, while US West Texas Intermediate crude futures saw a 1 percent increase, rising by 76 cents to hit $78.67 a barrel.
The active contracts on both benchmarks experienced a significant 4 percent jump in the previous session, reflecting the escalating tensions in the region.
The recent killings of Hamas leader Ismail Haniyeh in Tehran and the top military commander of Hezbollah in Beirut have intensified concerns that the ongoing conflict between Israel and Hamas could escalate into a wider Middle East war, potentially disrupting oil supply from the region.
Analyst Vivek Dhar from Commonwealth Bank of Australia noted the market’s anxiety over Iran’s potential involvement in the conflict, which could jeopardize its oil supply and infrastructure. The situation is further complicated by Iran’s strategic control of the crucial Strait of Hormuz, a key waterway for global oil transport.
With the possibility of a blockade in the Strait of Hormuz threatening a significant portion of global oil supply, oil markets remain on edge regarding potential disruptions.
In addition to geopolitical tensions, a set of data releases from the US, the world’s largest oil consumer, and a weakening dollar have also contributed to the surge in oil prices. Strong export demand led to a 3.4 million barrel decline in US crude oil stockpiles, according to the US Energy Information Administration.
Furthermore, the US dollar index continued its decline on Thursday following the Federal Reserve’s decision to maintain interest rates but hint at a potential cut in September. A weaker dollar typically boosts oil demand from investors holding other currencies.
Despite the current price surge, concerns linger over Chinese demand, with analysts like Priyanka Sachdeva from Phillip Nova pointing to weak manufacturing activity and declining new orders in China. These factors are expected to limit any significant upside in oil prices in the near future.