Oil steadied after the biggest jump in six months as markets digested the fallout from Hamas’s surprise attack on Israel over the weekend as well as the prospect of new economic stimulus measures in China.
Nearly 2,000 people have died so far as the conflict in Israel, which has the potential for wider geopolitical ramifications, entered a fourth day. West Texas Intermediate settled below $86 a barrel after jumping more than $3 on Monday.
While crude futures are moderating, rising tensions in the Middle East are keeping oil markets on alert, said Dennis Kissler, senior vice president for trading at BOK Financial Securities.
“If we continue to see escalation between Israel and Hamas, it’s just a matter of time until it reaches into oil-producing areas,” Kissler said. “All eyes will be watching Israel’s progress and any intentions they may have into Iran.”
While Israel and the Gaza Strip play a minor role in the world of oil, the Middle East accounts for about a third of global supply, and the market is still worried about potential threats. Stricter enforcement of US sanctions on Iranian crude exports and any blockades or attacks on vessels in key shipping lanes are the main risks, while the conflict also transforms the landscape for any potential US, Saudi and Israeli security pact.
President Joe Biden said some 14 American citizens had died, with others likely held hostage by Hamas. Iran denied on Monday that it was involved in the assault.
- WTI for November delivery slipped 41 cents to settle at $85.97 a barrel in New York.
- Brent for December settlement dropped 50 cents to settle at $87.65 a barrel.
Meanwhile, China is considering new measures to help its economy meet the country’s official growth target. An announcement could come this month, people familiar with the matter said.
The conflict has ratcheted up the volatility of oil prices, which have swung over the past month as concerns over high interest rates and slowing growth halted a rally that had been underpinned by Saudi Arabian-led output cuts. On Monday, options markets saw their biggest swing in favor of bullish calls since March 2022, when Russia’s invasion of Ukraine was roiling markets.
With Serene Cheong.