Oil Prices Tick Up Amid Middle East Crisis Fears
In a volatile trading session, oil prices inched up on Thursday, following a $1 surge per barrel in the previous session. Investors are on edge as tensions in the Middle East, particularly involving Iran, the third-largest oil producer in OPEC, continue to escalate.
Market Movement
At 9:32 a.m. Saudi time, Brent crude futures rose by 5 cents to reach $90.53 a barrel, while US West Texas Intermediate crude futures saw a 4-cent increase, reaching $86.25 a barrel.
The uptick in both contracts came after a more than 1 percent rise in the prior session. The killing of three sons of a Hamas leader in an Israeli airstrike in Gaza has heightened concerns that ceasefire talks between the two sides could be derailed.
Geopolitical Concerns
Market strategist at IG, Yeap Jun Rong, stated, “Prices remain sensitive to geopolitical developments in the Middle East, with market participants factoring in the risks of supply disruptions if tensions were to persist.”
This sentiment is also reflected in the recalibration of rate expectations, with investors now looking at a delay in potential rate cuts until September, as indicated by US interest rates.
Potential Impact on Oil Demand
The possibility of higher interest rates for a longer period could impact economic growth and suppress the demand for oil. This concern was further highlighted in the minutes from the US Federal Reserve, which emphasized the need for prolonged tight monetary policy to combat inflation.
Future Outlook
As the situation in the Middle East remains precarious, oil prices are expected to continue their upward trajectory. The region is currently on high alert for potential retaliatory actions from Iran following recent events.
Given the escalating tensions, US Secretary of State Antony Blinken has assured Israel of support against any threats posed by Iran. Analysts, such as Daniel Hynes from ANZ, have expressed growing concerns about the potential escalation of the conflict and its impact on oil supply.
Market Watch
In the coming days, oil traders will closely monitor the release of the monthly reports from OPEC and the International Energy Agency to gauge the impact of geopolitical tensions on the oil market.