Oil Prices Ease As Investors Analyze Impact Of Israel-Hamas War

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Oil prices fell on Monday after a surge last week, as investors waited to see if the conflict between Israel and Hamas would escalate and draw in other countries. This would potentially drive up prices further and deal a fresh blow to the global economy. At 0645 GMT, Brent futures were down 33 cents, or 0.4%, at $90.56 per barrel, while U.S. West Texas Intermediate (WTI) crude dropped 0.3% or 26 cents to $87.43 a barrel. Both benchmarks climbed nearly 6% on Friday, posting their highest daily percentage gains since April, as investors priced in the possibility of a wider Middle East conflict. For the week, Brent advanced 7.5% while WTI climbed 5.9%.


According to Hiroyuki Kikukawa, president of NS Trading, a unit of Nissan Securities, “Investors are trying to figure out the impact of the conflict while a large-scale ground assault has not begun after the 24-hour deadline that Israel first notified residents of the northern half of Gaza to flee to the south. The impact that may involve oil-producing countries has been factored into the prices to some extent, but if an actual ground invasion were to occur and have an impact on oil supply, the prices could easily exceed $100 a barrel.”


The conflict in the Middle East has had little impact on global oil and gas supplies, and Israel is not a big producer. But the war between Islamist group Hamas and Israel poses one of the most significant geopolitical risks to oil markets since Russia’s invasion of Ukraine last year, amid concerns about any potential escalation involving Iran. If Tehran is found to be directly involved in the Hamas attack, it would likely result in the U.S. fully enforcing its sanctions on Iran’s oil exports, said Commonwealth Bank of Australia analyst Vivek Dhar in a note on Monday.


Israel’s Prime Minister Benjamin Netanyahu vowed on Sunday to “demolish Hamas” as his troops prepared to move into the Gaza Strip in pursuit of Hamas militants whose deadly rampage through Israeli border towns shocked the world. Iran warned on Saturday that if Israel’s “war crimes and genocide” are not stopped, then the situation could spiral out of control with “far-reaching consequences”. With fears of the conflict escalating, U.S. Secretary of State Antony Blinken will return to Israel on Monday to talk “about the way forward” after several days of shuttle diplomacy between Arab states.


Last week, the U.S. imposed the first sanctions on owners of tankers carrying Russian oil priced above the G7’s price cap of $60 a barrel, an effort to close loopholes in the mechanism designed to punish Moscow for its invasion of Ukraine. Russia is one of the world’s top crude exporters, and the tighter U.S. scrutiny of its shipments could curtail supply.

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