Oil jumps more than $4 as markets are affected by violence in the Middle East

Oil prices rose more than three percent on Monday, as clashes between Israel and the Palestinian Islamic Resistance Movement (Hamas) raised fears of a broader conflict in the Middle East.

By 1143 GMT, Brent crude rose $2.70, or 2.2 percent, to $87.28 per barrel, while US West Texas Intermediate crude recorded $85.57 per barrel, up $2.78, or 3.4 percent.

The two benchmarks rose more than $4 a barrel earlier in the session.

The rise in oil prices came to reverse the downward trend last week, which witnessed the largest weekly decline since March, as Brent fell 11 percent and West Texas Intermediate crude fell more than eight percent amid concerns about rising interest rates and their impact on global demand.

On Saturday, the Palestinian Islamic Resistance Movement (Hamas) launched the largest military attack on Israel in decades, killing hundreds of Israelis. In response, Israel carried out a wave of retaliatory air strikes on Gaza, killing hundreds.

The outbreak of violence threatens to derail American efforts to mediate a rapprochement between Saudi Arabia and Israel, as the Kingdom will normalize relations with Israel in exchange for a defense deal between Washington and Riyadh.

It was reported that Saudi officials informed the White House on Friday that they were ready to increase production next year as part of the proposed agreement with Israel.

Any increase in Saudi production would help ease supply scarcity after months of production cuts from Saudi Arabia and Russia, two of the main producers of crude.

The normalization of Saudi-Israeli relations is likely to freeze recent moves aimed at achieving a breakthrough in relations between Saudi Arabia and Iran.

“Increasing geopolitical risks in the Middle East should support oil prices… and more volatility can be expected,” analysts from ANZ Bank said in a note to clients.

The attacks sparked condemnation from Western countries, but Iran and Hezbollah, Iran’s ally in Lebanon, publicly praised them.

Market attention turned to the possibility of Iran’s involvement in the attacks, which the Israeli authorities have already claimed.