Both Brent and WTI crude oil rose 5% this morning, driven by growing investor concerns about political instability in the Middle East.
At the opening of trading on the morning of October 9th, Brent crude rose 4.9% to $88.7 per barrel. US WTI crude also increased 5.1% to $87.
This development reverses the trend of last week – when the market recorded its sharpest weekly decline since March. Specifically, Brent lost 11% and WTI fell more than 8% due to concerns about the impact of high interest rates on global oil demand.
However, on October 7, the Hamas militant group attacked Israel, launching its largest military operation against the country in decades. Israel retaliated with a series of airstrikes on the Gaza Strip. On October 8, Israel said clashes with Hamas militants had killed at least 600 civilians and soldiers, while Gaza officials reported the death toll at 370.
"Political instability in the Middle East will support oil prices. Greater volatility is expected in the coming period," analysts at ANZ commented.
Smoke rises over an Israeli city following shelling from Gaza on the morning of October 7. Photo: Reuters
This event could derail U.S. efforts to mediate between Saudi Arabia and Israel. If Saudi Arabia normalizes relations with Israel, it will have a defense agreement with the U.S. and will have to increase oil production. This would help alleviate the supply shortages of the past few months, caused by Russia and Saudi Arabia restricting crude oil production.
The market is now awaiting a response from Iran, following Israel's accusation that the country was involved in the attack. US officials said on October 8 that they are investigating Iran's role, but have not yet found evidence.
"This attack will have a major and long-lasting impact on the oil market if supply continues to fall and shipping is disrupted. If Western countries believe Iran played a role in this event, Iranian supply and exports will certainly be threatened," said Vivek Dhar, an analyst at Commonwealth Bank.
Ha Thu (according to Reuters)
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