Oil Prices Surge After Iran Orders Strike on Israel
Oil prices spike as Iran orders retaliatory strike on Israel, raising concerns over Middle Eastern tensions and global oil supply
Oil prices jumped sharply on Wednesday following reports that Iran had ordered a strike on Israel in response to the killing of a Hamas leader. Brent crude oil prices rose above $81 per barrel, a 3.6% increase from the previous day. West Texas Intermediate (WTI) oil prices also climbed above $78 per barrel.
Background of the Conflict
The tension began when Israel was accused of assassinating a Hamas political leader in Tehran and a senior Hezbollah member in Beirut. In retaliation, Iran's Supreme Leader, Ayatollah Ali Khamenei, ordered a direct strike on Israel. This move significantly escalated the situation in the Middle East.
US Efforts and Market Reactions
While US officials are trying to broker a cease-fire in Gaza, the task has become more difficult following the death of Ismail Haniyeh, a key Hamas leader. The ongoing conflict has led to more buying of call options, financial bets that profit from rising oil prices.
OPEC+ Meeting and Global Oil Supply
The oil market is also focused on an upcoming meeting of the Organization of the Petroleum Exporting Countries (OPEC) and its allies. The group is expected to maintain its current plan to increase oil production in the fourth quarter.
"Oil markets are rightly concerned that Iran's involvement could disrupt oil supplies," said Vivek Dhar, an analyst at Commonwealth Bank of Australia. "This could threaten Iran’s oil production and infrastructure."
Broader Market Impact
Despite a drop in oil prices in July due to concerns over China's demand, crude oil prices have remained high this year. The tension in the Middle East, OPEC+ production cuts, and expected US demand increases have all contributed to this trend. Federal Reserve Chair Jerome Powell indicated that an interest rate cut could happen as soon as September, which may boost US demand further.
US Oil Inventory Report
Adding to the market dynamics, US crude oil inventories decreased by 3.4 million barrels last week, marking the fifth consecutive week of decline. This is the longest streak of inventory drops since January 2022. Stock levels at the Cushing, Oklahoma hub also fell, adding to the overall decrease in oil supplies.
As the Middle Eastern conflict continues to unfold, the oil market remains volatile, with prices reacting swiftly to geopolitical events. Traders and analysts will be watching closely for further developments and their potential impact on global oil supply.
Also Read: Oil Prices Rebound as Israel-Hezbollah Tensions Rise and China Demand Worries Persist
