Israeli airstrikes have resulted in the deaths of at least 274 people, causing oil prices to rise on Monday as investors expressed concerns about supply disruptions amid escalating tensions in the Middle East and a developing tropical disturbance in the Gulf of Mexico.
Brent crude futures for November increased by 51 cents, or 0.6%, reaching $75 a barrel by 10:21 AM ET (1421 GMT). Meanwhile, US crude futures for November rose by 65 cents, or 0.9%, to $71.65.
Israel’s airstrikes targeted hundreds of Hezbollah positions, marking the deadliest day in Lebanon amid nearly a year of conflict with the militia group. Following nearly a year of warfare in Gaza, Israel is now focusing on its northern border, where Hezbollah has been launching rockets in support of Hamas.
Dennis Kissler, senior vice president of trading at BOK Financial, noted, “More attacks from Israel on Lebanon raise fears that Iran could become more involved, increasing the risk to oil exports.”
Additionally, a tropical disturbance near the Gulf of Mexico has led Shell to temporarily shut down production at its Stones and Appomattox facilities as a precaution.
Both oil benchmarks rose over 4% last week, driven by the US Federal Reserve’s decision to cut interest rates by 50 basis points and indicate further cuts by the end of the year. Federal Reserve Bank of Chicago President Austan Goolsbee stated on Monday that he anticipates “many more rate cuts over the next year” as the Fed aims for a soft landing for the economy, balancing inflation control with labor market stability.
However, a sharp contraction in euro zone business activity this month has tempered price increases, as the region’s dominant services sector flatlined and manufacturing downturn accelerated. In the US, business activity remained steady in September, but average prices for goods and services rose at the fastest pace in six months, suggesting a potential uptick in inflation.
China, the world’s largest oil importer, is grappling with deflationary pressures and struggling to boost growth despite multiple policy measures aimed at stimulating domestic spending.
Harry Tchilinguirian, head of research at Onyx Capital Group, commented, “Oil appears rangebound despite the uplift to risky asset prices from last week’s substantial Fed rate cut.”
