Oil futures began the week on a strong note, experiencing significant gains after an attack led by Hamas on Israel. This incident has heightened tensions in the Middle East and raised concerns about the future supply of crude oil.
Price Action
- West Texas Intermediate (WTI) crude for November delivery rose by $2.53, or 3.1%, reaching $84.32 on the New York Mercantile Exchange.
- December Brent crude, the global benchmark, witnessed an increase of $2.35, or 2.8%, and settled at $86.93 per barrel on ICE Futures Europe.
Market Drivers
Traders closely monitored Iran as Hamas militants, supported by Tehran, launched a weekend attack on multiple fronts. The Wall Street Journal revealed that Iranian security officials played a role in planning the attack, resulting in the death of more than 700 Israelis, with numerous Israeli citizens and soldiers being abducted. In retaliation, Israel conducted airstrikes on Gaza, where the death toll also rose into the hundreds.
If confirmed, analysts believe that Iranian involvement could prompt the United States to strengthen the enforcement of sanctions on Iran’s crude exports. In recent months, these export levels have been steadily rising towards pre-2018 figures.
Stephen Innes, Managing Director at SPI Asset Management, highlighted that historical analysis indicates that oil prices tend to experience sustained gains during Middle East crises.
Recent Trends
After approaching the $100-a-barrel mark for Brent last month and witnessing WTI briefly surpass $95 a barrel for the first time in over a year, oil prices declined last week.
According to the Wall Street Journal, Iranian crude production exceeds 3 million barrels per day, with exports surpassing 2 million barrels per day. These are the highest levels since the U.S. withdrew from the Iranian nuclear accord in 2018. However, sales plummeted to approximately 400,000 barrels per day in 2020 due to the reimposition of sanctions by the U.S.
See: U.S. stock futures tumble after Hamas attack on Israel