In a turbulent turn of events, the recent assault by Hamas on Israel has triggered a sharp rise in oil prices, causing considerable market turmoil. This crisis unfolded just a day after Israel launched a retaliatory strike against the Gaza Strip. Thus, responding to one of the deadliest attacks in its history.
Oil Prices Soar on the Middle East
On Monday, oil prices surged by a significant margin. With Brent crude climbing to $87.50 per barrel, marking a 3% increase in a single day. West Texas Intermediate crude followed suit, reaching $86.84 per barrel, a substantial 3.7% uptick. These benchmarks had initially surged even higher, surpassing $4 per barrel before experiencing a minor retreat.
Safe-Haven Assets Gain Traction
Amid the escalating tensions, safe-haven assets such as the U.S. dollar and the Japanese yen witnessed a modest uptick. The dollar index strengthened to 106.32, gaining ground throughout the day. Additionally, spot gold saw a 1.2% increase, reaching $1853.09 per ounce.
Expert Opinions
Michael Hewson, Chief Market Analyst at CMC Markets in London, remarked Middle East. “The events over the weekend and the Hamas atrocities in Israel have prompted a move into the U.S. dollar, gold, as well as a modest bid into bonds, as concerns over escalation risks move to the forefront.”
Alvin Tan, Head of Asia FX Strategy at RBS Capital Markets, expressed concerns about the conflict’s potential to involve Iran, saying, “The current scope of the conflict has no direct impact on global oil supply, but the worry is that it might drag in Iran.”
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Ipek Ozkardeksaya, Senior Analyst at Swissquote Bank in Geneva, provided a broader geopolitical perspective, highlighting the differences from past conflicts. “First, Arabic countries are not attacking Israel together,” she noted. “Second, OPEC countries do have spare capacity that they restrict willingly to maintain oil prices above $80 per barrel, but they don’t necessarily think of tripling oil prices – which would only accelerate the energy transition.”
Ozkardeksaya further emphasized that while the situation is concerning, a full-scale rise in oil prices remains uncertain at this point.
In the midst of this escalating conflict, global financial markets are bracing themselves for further developments that could have far-reaching implications.
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