Oil prices rebound amid Middle East tensions as Israel plans action on Iran
Brent crude approaches $74 as geopolitical risks heighten, but market fears ease.
Oil prices have rebounded after a sharp 8% drop last week, fueled by escalating tensions in the Middle East, according to Bloomberg.
Israeli Prime Minister Benjamin Netanyahu held strategic discussions with senior advisors to outline potential military actions against Iran, raising concerns over the stability of regional oil supplies.
Brent crude, the global oil benchmark, rose toward $74 per barrel, while U.S. West Texas Intermediate (WTI) climbed above $69 per barrel, reflecting the market's sensitivity to the geopolitical climate.
Tensions escalated over the weekend when a Hezbollah drone exploded near Netanyahu’s private residence, prompting Israel to launch fresh military strikes on Hezbollah positions in Lebanon the next day.
Israel had already vowed to retaliate against Iran following a significant attack in early October, further heightening risks to the region’s oil infrastructure.
Oil prices have been particularly volatile this month as traders grapple with the uncertainty surrounding Middle Eastern oil flows amid the Israel-Iran standoff, while simultaneously dealing with weakening demand signals from China.
Adding to market complexities, the International Energy Agency (IEA) warned of a potential global oil surplus in 2024, driven by OPEC+ plans to restore its shuttered production capacity in December incrementally.
As Netanyahu continued to plan potential strikes on Iran, he first convened with his closest advisors and then consulted with Israel’s mini-security council. Despite U.S. advice to avoid targeting energy infrastructure in Iran, OPEC’s third-largest producer, Netanyahu’s office reaffirmed Israel’s stance on making independent military decisions.
Though Middle Eastern tensions remain elevated, market data suggest easing fears. The gap between the current Brent crude price and the price for delivery in three months—a key indicator of market sentiment—has narrowed to 91 cents per barrel in backwardation, down from $1.61 a month ago and over $2 three months ago.
This reduction indicates that traders are less concerned about immediate supply disruptions.
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