Oil prices climbed on Monday, driven by rising concerns about potential supply disruptions from the Middle East. The surge in Israeli attacks against Iranian-backed forces, including Hezbollah and the Houthi, has heightened worries about the conflict escalating and drawing Iran directly into the fray.
Iran is a crucial member of OPEC, the Organization of the Petroleum Exporting Countries, and a major oil producer. ANZ Research noted that the recent escalation of attacks in the Middle East significantly increases the risk of supply disruptions from this OPEC member.
Brent crude futures for November delivery rose by 0.22%, settling at $72.14 a barrel, while the more active December contract gained 0.14%, reaching $71.64. U.S. West Texas Intermediate crude futures also saw an increase of 0.12%, closing at $68.26 a barrel.
These gains come after a week of decline, with Brent falling around 3% and WTI dipping approximately 5% due to concerns about demand. These worries were exacerbated by the lack of reassurance from China’s fiscal stimulus measures. China, the world’s second-largest economy and top oil importer, had hoped to bolster market confidence with its stimulus plans.
However, the escalating tensions in the Middle East have overshadowed these demand concerns. Israel’s recent actions, including bombing Houthi targets in Yemen and the assassination of Hezbollah leader Sayyed Hassan Nasrallah, have led to heightened tensions in the region.
In response to the situation, U.S. Defense Secretary Lloyd Austin has authorized the military to strengthen its presence in the Middle East. The Pentagon has stated that if Iran, its allies, or proxies target U.S. personnel or interests, Washington will take decisive action to defend its people.
While the Middle East conflict is driving up oil prices, the market is also awaiting signals from the Federal Reserve regarding its monetary policy. ANZ Research highlights that markets will be closely watching Federal Reserve Chair Jerome Powell for clues on the Fed’s pace of easing monetary policy, with seven other Fed policymakers scheduled to speak this week.
Despite the rise in prices, the oil market remains under pressure from other factors. OPEC+ (OPEC and its allies) is scheduled to raise output by 180,000 barrels per day in December, and Libya is expected to resume oil exports, both of which could weigh on prices. The oil market remains a volatile landscape, with geopolitical tensions and economic concerns playing a constant role in shaping its trajectory.
