Middle East tensions fuelling oil prices

Hong Kong: Oil prices rose above $91 a barrel on Monday as diplomatic efforts to address the crisis in the Middle East intensified. Investors are concerned that the Israel-Hamas war could spark a wider conflict in the oil-rich region and further tighten global supply, CNN reported.

Brent crude futures, the global oil benchmark, rose as high as $91.2 a barrel in Asian hours on Monday, up slightly from the October 13 settlement price of $90.89. It was last trading at $90.99 a barrel, CNN reported. West Texas Intermediate, the US benchmark, briefly rose to $87.98, compared to Friday’s closing price of $87.68. It was last trading at $87.77 a barrel. Both futures surged on Friday, after Israel’s military warned more than 1 million people to leave northern Gaza, triggering worries about a potential ground offensive by Israel in retaliation for Hamas’ terror attacks that killed at least 1,400 people.

Speaking to CBS Sunday, US National Security Adviser Jake Sullivan said while there was no new intelligence that the threat level from Iran had changed, “there is a risk of an escalation of this conflict”. Analysts from ANZ Research expect oil prices to hit $100 a barrel in the short term because of the growing risk of regional escalation, CNN reported.

Neither Israel nor Hamas is a significant oil supplier, but the risk to oil markets will rise if “the conflict broadens,” they wrote in a note. “If (Iran) becomes involved, up to 20 million barrels per day of oil could be at risk of disruption directly and through obstructed logistics.” The Middle East risk is dominating the landscape for global asset prices, said Stephen Innes, managing partner for SPI Asset Management, CNN reported.