Geopolitical Uncertainty Rocks Oil Market

8 Oct 2024 , 10:40 AM

Oil prices fell in early Asian trading hours on Tuesday as traders took profits after rallying to their highest level in over a month on Monday amid fears that the Middle East is on the verge of war.

Fighting in the Middle East escalated when Iran-backed Hezbollah fired missiles towards Israel’s third-largest city, Haifa, and Israel appeared to be preparing to expand its offensive into Lebanon, a year after the Hamas attack on Israel that sparked Israel’s continuing conflict in Gaza.

The rally started after Iran conducted a missile bombardment on Israel on October 1. Israel has vowed to react and is considering targets, including Iran’s oil facilities.

Brent crude futures declined 23 cents, or 0.3%, to $80.70 a barrel. US West Texas Intermediate futures decreased by 20 cents, or 0.3% to $76.94 per barrel.

Both contracts surged more than 3% on Monday, reaching their greatest levels since late August, building on last week’s rally, which saw them increase by more than 8% for the largest weekly gains in almost a year.

However, some analysts feel that a strike on Iranian oil infrastructure is improbable, and they warn that if Israel focusses on another target, oil prices could fall significantly.

Even if an attack targets Iranian oil infrastructure, there remains 7 million barrels per day of spare capacity inside the Organisation of Petroleum Exporting Countries (OPEC).

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