Oil prices experienced a decline of over 1% on Monday, driven by persistent concerns about weakened global demand. This downturn came despite the escalating conflict between Israel and Hezbollah in the Middle East, which has heightened geopolitical risks and could potentially disrupt energy supplies. However, investors seemed more focused on the broader macroeconomic picture of slowing global consumption rather than the immediate implications of the regional conflict. U.S. energy stocks, tracked by the Energy Select Sector SPDR Fund (XLE), remained largely unchanged during the final hour of trading in New York.
The conflict between Israel and Hezbollah intensified dramatically on Monday, with Israel launching its most extensive air campaign yet against Hezbollah targets in southern Lebanon. The Israeli military executed 650 air strikes in the past 24 hours, targeting over 1,100 locations with more than 1,400 munitions, according to Reuters. The attacks focused on Hezbollah’s military infrastructure, including rocket launchers and underground weapon storage facilities.
As a result of the escalating conflict, tens of thousands of civilians in southern Lebanon have begun fleeing towards the north, leading to severe traffic congestion on key roads as the population seeks safety. The conflict, which has been simmering for nearly a year, now shows signs of spiraling into a larger regional crisis. “Essentially, we are targeting combat infrastructure that Hezbollah has been building for the past 20 years. This is very significant. We are striking targets and preparing for the next phases,” stated Israeli Prime Minister Benjamin Netanyahu in a statement.
The international community has reacted swiftly to the intensifying conflict. The Pentagon has announced plans to deploy additional troops to the Middle East as a precautionary measure in light of the growing instability. Vice President Kamala Harris and President Joe Biden are both scheduled to hold separate meetings with UAE President Sheikh Mohamed bin Zayed Al Nahyan to discuss a potential ceasefire deal in Gaza. Stéphane Dujarric, spokesperson for U.N. Secretary-General Antonio Guterres, expressed concern over the rising number of civilian casualties reported by Lebanese authorities. “The Secretary-General is deeply worried about the rising toll on civilian lives and the broader implications for regional stability,” stated Dujarric.
Reactions from other regional players in the Middle East have largely been critical of Israel’s actions. Turkey’s Foreign Ministry condemned Israel’s air strikes, labeling them “a new phase in its efforts to drag the entire region into chaos.” Iranian President Masoud Pezeshkian, speaking to journalists upon his arrival in New York for the United Nations General Assembly, accused Israel of deliberately provoking a wider conflict. “Israel wants to drag the Middle East into a full-blown war by provoking Iran to join the nearly year-old conflict between Israel and Tehran-backed Hezbollah in Lebanon,” Pezeshkian said.
