LONDON (Reuters) – Hamas’ assault on Israel drove oil prices higher on Monday as markets priced in fears of a wider conflict in the Middle East, a day after Israel pounded the Palestinian enclave of Gaza in retaliation for one of the bloodiest attacks in its history.
Fighters from Islamist group Hamas killed 700 Israelis and abducted dozens more as they attacked Israeli towns on Saturday, the deadliest incursion into Israeli territory since Egypt and Syria’s attacks in the Yom Kippur war 50 years ago.
MARKET REACTION:
– Oil prices were up $3 a barrel Monday, with Brent crude trading at $87.50 a barrel – up over 3% on the day.
– West Texas Intermediate crude was at $86.84 a barrel, up 3.7%. Both benchmarks had jumped more than $4 a barrel earlier, before easing slightly.
– The safe-haven dollar and Japanese yen edged higher. The dollar index was at 106.32, a touch firmer on the day.
– Spot gold was 1.2% higher at 1853.09 an ounce
COMMENTS:
MICHAEL HEWSON, CHIEF MARKET ANALYST, CMC MARKETS, LONDON:
“The events over the weekend and the Hamas atrocities in Israel, and the latter’s reaction to them and subsequent declaration of war, have prompted a move into the U.S. dollar, gold as well as a modest bid into bonds, as concerns over escalation risks move to front of mind.”
ALVIN TAN, HEAD OF ASIA FX STRATEGY, RBS CAPITAL MARKETS:
“The current scope of the conflict has no direct impact on global oil supply, but the worry is that it might drag in Iran.”
“U.S. Secretary of State Blinken said over the weekend that there was no evidence of Iran being “directly involved” in the attack on Israel, but there is indeed a longstanding relationship between Iran and Hamas.”
IPEK OZKARDESKAYA, SENIOR ANALYST, SWISSQUOTE BANK, GENEVA:
“From a geopolitical perspective, this war is different from the one in 1973 because the political and the geopolitical landscape is unalike.
“First Arabic countries are not attacking Israel together.
“Second, OPEC countries do have spare capacity that they restrict willingly to maintain oil price at above $80 (per barrel), but they don’t necessarily think of tripling oil prices – which would only accelerate the energy transition.
“Third, yes, the U.S. could continue to tap into its strategic oil reserves to level out a potential price shock even though SPR is down to a 40-year low following the Ukrainian war and finally, the Ukrainian war and embargo on Russian oil are already in play and the West has little margin to impose another embargo on Arab oil.
“This being said, potential retaliation against Tehran is a serious upside risk for oil prices. We will keep an eye on developments, but don’t speculate on a full-blast rise in oil prices for now.”
(Reporting by the Markets Team; Compiled by Dhara Ranasinghe)
