May 21, 2024
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Oil Prices Rise as Middle East Tension Worsen

As crisis in the middleEast worsen, with the third largest oil producer in OPEC getting involved, oil prices surge higher on Thursday, after rising a dollar a barrel in the prior session.

Brent crude futures advanced by 30 cents, or 0.3%, to $90.78 a barrel by 0325 GMT, while U.S. West Texas Intermediate crude futures rose 25 cents, or 0.3%, to $86.46 a barrel.

Both contracts rose more than 1% in the prior session after three sons of a Hamas leader were killed in an Israeli airstrike in Gaza, feeding worries that ceasefire talks between the two sides might stall.

The discussions between Israel and Hamas earlier this week, yielded no result as their six months old war continue to escalate.

“Prices remain sensitive to geopolitical developments in the Middle East, with market participants pricing for the risks of supply disruptions if tensions were to drag for longer,” said Yeap Jun Rong, market strategist at IG, as Reuters gathered.

“This aids to offset some risk-off sentiments overnight, as markets recalibrate their rate expectations to price out a June rate cut and for rates to be kept high for longer until September,” Yeap added, referring to U.S. interest rates.

Data from the U.S. Federal Reserve showed officials worried that progress on inflation might have stalled and a longer period of tight monetary policy would be needed to tame inflation in the world’s largest economy.

Oil prices according to Yeap may continue to go high as tensions in the middleeast may increase. Iran may retaliate to a recent suspected Israeli airstrike on Iran’s embassy in Syria at the start of the month.

U.S. Secretary of State Antony Blinken has told Israeli Defense Minister Yoav Gallant that the United States will stand with Israel against any threats by Iran, the U.S. State Department said later on Wednesday.

“The market has become increasingly concerned that the Israel-Hamas war could escalate across the Middle East, putting oil supply at risk,” ANZ analyst Daniel Hynes said.

Oil Marketers await a monthly oil report by OPEC on Thursday and the International Energy Agency’s oil market report due on Friday.

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