Oil Surges on Middle East War Fears

6 Aug 2024 , 09:19 AM

Oil prices rose more than $1 on Tuesday, reversing the previous day’s loss, as concerns about an intensifying Middle East conflict threatening supplies trumped fears about a probable U.S. recession reducing demand in the world’s largest oil consumer.

Brent crude prices rose $1.25, or 1.6%, to $77.55 per barrel, while US West Texas Intermediate crude futures rose $1.35, or 1.9%, to $74.29.

On Monday, both benchmarks fell by about 1% against the backdrop of declining global stock markets. The drop in oil prices was restricted by concerns that Iranian reprisal for the death of a Hamas leader in Tehran would spark a larger Middle Eastern war.

Israel and the United States are ready for a serious escalation after Iran and its allies Hamas and Hezbollah vowed to respond against Israel for the deaths of a Hamas leader and a Hezbollah military commander last week.

The United States has been pressing countries to emphasise to Iran that escalation is not in its interests, a State Department official said on Monday, amid what Secretary of State Antony Blinken described as a “critical moment” for the region.

At least five American servicemen were injured in an attack on an Iraqi military base on Monday, according to US sources. It was not clear whether the attack was related to the reprisal threats.

Iran’s President Masoud Pezeshkian told a key ally of Russian counterpart Vladimir Putin on Monday that Tehran was eager to strengthen ties with its “strategic partner Russia,” Iranian state television said.

On the supply side, OPEC member Venezuela’s oil shipments decreased in July due to outages in crude processing units, which reduced stock available from the country’s primary producing region and delayed cargo loading, according to papers and vessel monitoring data.

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