Concerns over potential oil supply disruptions in the Middle East have led to an increase in Brent crude and West Texas Intermediate prices during Asian trading hours. The surge follows ongoing Israeli military actions in Lebanon, which escalated after the killing of Hezbollah leaders last week. Additionally, Israel has targeted locations in Yemen, indicating a willingness to broaden the conflict.
ANZ analysts highlighted the risk of Iran being directly involved in the escalating tensions, which could significantly threaten oil supply from OPEC producers.
Contrarily, some analysts argue that recent events in the Middle East are not the primary drivers of rising oil prices. Warren Patterson, head of commodities strategy at ING, stated that the oil market has become desensitized to Middle Eastern developments. He noted that the prolonged conflict has not impacted oil output significantly, and OPEC maintains a considerable amount of spare capacity. Patterson suggested that support measures from China are currently bolstering oil prices more than Middle Eastern tensions.
Last week, the Chinese government announced new stimulus initiatives to ensure it meets its GDP growth target. The central bank recently revealed plans to lower mortgage rates on existing loans to counter the real estate slowdown affecting the economy this year.
Patterson’s view is echoed by Helima Croft of RBC Capital Markets, who remarked that current oil prices do not adequately reflect the risks of a wider conflict in the Middle East. Croft emphasized that traders should closely monitor the situation, as any significant Israeli military action, such as an incursion into Lebanon, could provoke Iran’s direct involvement in the conflict.
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