Middle East tensions

Oil prices jump following Israel-Gaza attacks

Attacks on Israel have alerted oil markets

Oil prices leapt by 4% early today on concerns that the situation in Israel and Gaza could disrupt output from the Middle East.

West Texas Intermediate (WTI), the benchmark for US oil, rose to more than $86 a barrel. Brent crude was trading at $87.34, up from $84.22 late on Friday.

The dollar strengthened as the tensions in the Middle East prompted a move to the safe-haven currency.

The Israel and Palestinian territories are not oil producers. But the Middle Eastern region accounts for almost a third of global supply.

A wave of attacks launched by the Hamas militant group on Saturday was the biggest escalation between the two sides for decades.

“The risk premium on oil is rising due to the prospect of a wider conflagration that could spread to nearby major oil producing nations such as Iran and Saudi Arabia,” energy analyst Saul Kavonic said.

“If the conflict envelops Iran, which has been accused of supporting the Hamas attacks, up to 3% of global oil supply is at risk,” he added.

Mr Kavonic estimated that around a fifth of global supply would be “held hostage” if passage through the Strait of Hormuz, a crucial route for the main oil exporters in the Gulf region, whose economies are built around oil and gas production.

Following Russia’s invasion of Ukraine in February 2022, oil prices soared, hitting more than $120 a barrel in June last year.

They fell back to a little above $70 a barrel in May this year, but have steadily risen since then as producers have tried to restrict output to support the market.

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