BEIJING, Oct 9 — Oil prices surge over $3 per barrel in early Asian trade on Monday, heightening political uncertainty across the Middle East as Israeli and Hamas forces engage in dramatic military clashes.
Brent crude (LCOc1) rises $3.34, or 3.95%, reaching $87.92 per barrel, while U.S. West Texas Intermediate crude (CLc1) sits at $86.23 per barrel, up $3.44, or 4.16%.
Over the weekend, the Palestinian Islamist group Hamas launches an extensive military assault on Israel, resulting in hundreds of Israeli casualties and prompting a series of retaliatory Israeli air strikes on Gaza, which continue into Sunday.
These violent events jeopardize U.S. efforts to facilitate a rapprochement between Saudi Arabia and Israel, wherein Saudi Arabia would normalize relations with Israel in exchange for a defense agreement between Washington and Riyadh.
The normalization of Saudi-Israeli relations would likely halt recent progress towards easing tensions between Saudi Arabia and Iran.
“Increasing geopolitical risk in the Middle East should bolster oil prices… higher volatility can be anticipated,” states a note from analysts at ANZ Bank.
While Western countries condemn the attacks, they are openly applauded by Iran and Hezbollah, Iran’s allies in Lebanon.
Attention has shifted to the possibility of Iranian involvement in the attacks, an allegation already made by Israeli authorities.
“For this conflict to have a lasting and significant impact on oil markets, there must be a sustained reduction in oil supply or transportation,” notes Vivek Dhar, an analyst at Commonwealth Bank of Australia.
“If Western countries officially link Iranian intelligence to the Hamas attack, Iran’s oil supply and exports face imminent downside risks,” Dhar continues.
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