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Oil prices extended their rally on Monday, with Brent crude approaching $80 a barrel. This follows last week’s sharpest weekly increase since early 2023, fueled by fears of an escalating Middle East conflict that could disrupt exports from the region.
As of 0839 GMT, Brent crude futures rose by $1.11, or 1.4%, to $79.16 a barrel, while U.S. West Texas Intermediate (WTI) crude climbed $1.28, or 1.7%, to $75.66 a barrel.
Last week, Brent surged over 8%, while WTI jumped 9.1% amid concerns that Israel might target Iranian oil infrastructure in retaliation for Iran’s missile attack on Israel on October 1.
Escalating Conflict Raises Supply Fears
“The potential for an escalating conflict is overshadowing mounting demand-side pressures,” said Priyanka Sachdeva, an analyst at Phillip Nova.
On Monday, Iran-backed Hezbollah fired rockets at Israel’s third-largest city, Haifa. Meanwhile, Israel appeared ready to expand its ground incursions into southern Lebanon, marking the one-year anniversary of the Gaza war, which has since ignited broader conflicts across the Middle East.
The prospect of a broader regional war involving the U.S., Israel’s key ally, and Iran, its adversary, has intensified concerns over oil supply disruptions.
Limited Immediate Impact on Oil Supply
ANZ Research suggested that the immediate impact on global oil supply could be limited. The Organization of the Petroleum Exporting Countries (OPEC) and its allies, known collectively as OPEC+, are set to increase production from December, after several years of cuts aimed at propping up prices amid weak demand.
OPEC+ has enough spare capacity to compensate for any disruption to Iranian supply, but analysts warn that if Iran retaliates by attacking oil installations in neighboring Gulf nations, the situation could become more difficult to manage.
A year ago, when tensions in the Middle East escalated, Brent crude was trading at $88.15. Current prices remain roughly $10 lower despite recent gains.
