Oil prices continued to rise on Monday due to concerns that the escalating Gaza conflict could disrupt oil supplies in the Middle East. Brent crude futures increased by 56 cents, or 0.7%, to $79.58 a barrel, while U.S. crude futures gained 57 cents, or 0.75%, reaching $75.40 a barrel by 0615 GMT.
The surge in prices follows one of the most intense border clashes in over 10 months, where Hezbollah launched hundreds of rockets and drones into Israel. In response, Israel conducted airstrikes on Lebanon. The situation heightens fears that the Gaza conflict might expand regionally, potentially involving Iran and the U.S.
Kelvin Wong, a senior market analyst at OANDA, noted that geopolitical risks are likely to have a significant impact on the oil market. He mentioned that possible retaliatory actions by Hezbollah and Iran could support WTI crude prices.
Oil prices also gained more than 2% on Friday after U.S. Federal Reserve Chair Jerome Powell hinted at upcoming interest rate cuts, boosting market sentiment. ANZ analysts expect a series of progressive rate cuts by the Fed.
Despite recent gains, oil prices fell last week due to a bleak economic outlook affecting fuel demand. Market caution is also attributed to potential increases in output by OPEC+ and concerns over weak demand from China. Priyanka Sachdeva of Phillip Nova noted that strong U.S. demand and the replenishment of the Strategic Petroleum Reserve (SPR) are the main supports for current oil prices.
The U.S. Energy Department announced the purchase of nearly 2.5 million barrels to refill the SPR. Meanwhile, the number of operating U.S. oil rigs remained steady at 483, according to Baker Hughes.
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