Oil prices rise as Israel-Gaza clashes stoke political uncertainty

Hamas launched the largest military assault on Israel in years on Saturday

Destroyed buildings and residential towers in the Rimal district of Gaza city. Bloomberg

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Oil prices rose about four per cent in morning trading on Monday as military clashes between Israel and Hamas stoked political uncertainty in the region.

Brent, the benchmark for two thirds of the world’s oil, was trading 4 per cent higher at $87.96 a barrel at 9.54pm UAE time. West Texas Intermediate, the gauge that tracks US crude, was up 4.14 per cent at $86.22 a barrel.

The ruling Hamas group in the Gaza Strip launched the largest military assault on Israel in decades on Saturday, firing thousands of rockets as dozens of fighters infiltrated the heavily fortified border.

Israel responded by launching a barrage of air strikes on the besieged Gaza Strip. The country’s Prime Minister Benjamin Netanyahu has spoken of a “long war”.

The combined death toll from the Hamas attack on southern Israel and Israel’s assault on the Gaza Strip has climbed to more than 1,100 as fighting enters a third day.

“We note that there has been no impact to current global oil production and that we see as unlikely any immediate large effect on the near-term supply-demand balance and near-term oil inventories, which tend to be the main fundamental driver of oil prices,” Goldman Sachs analysts said in a research note on Sunday.

The US investment bank maintained its oil price forecast of $100 a barrel by June 2024 and said that it expects Saudi Arabia to unwind its voluntary output cut of 1 million barrels per day “gradually” by the first quarter of 2025.

Last week, oil prices posted their biggest weekly loss since March amid demand concerns.

For the week, Brent dropped about 11 per cent while WTI posted a more than 8 per cent decline, on market worries that persistently high interest rates would slow down global economic growth, which in turn would hit fuel demand.

Last week, the Opec+ group of crude oil-producing states decided to stick to its current output policy and said it was closely assessing the market to take additional measures at “any time”.

Meanwhile, Saudi Arabia and Russia have reaffirmed their combined supply cut of 1.3 million bpd to the end of the year.

The group has enforced total production curbs of 3.66 million bpd or about 3.7 per cent of global demand.

This includes a reduction of 2 million bpd agreed on last year and voluntary cuts of 1.66 million bpd, announced in April and extended to December 2024.

On Friday, Russia lifted a ban on the export of diesel through pipelines after it introduced the measure last month to stabilise the domestic market, according to a Tass news agency report.

The restrictions for gasoline exports, however, continue to remain in place.