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(Bloomberg) — Oil jumped — extending an earlier gain — after Hamas said Israel killed its political leader, stoking tensions in a region that produces around a third of the world’s crude.
Global benchmark Brent rose to near $80 a barrel after tumbling by 4.5% over the previous sessions, with West Texas Intermediate around $76. Hamas said Israel killed its political leader, Ismail Haniyeh, in an airstrike in Iran. It followed an earlier attack by Israel on Beirut that killed a senior Hezbollah commander.
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There’s been a tit-for-tat exchange of fire in recent days, with a Hezbollah strike in the Israel-controlled Golan Heights killing 12 children, potentially putting the ongoing cease-fire talks between Israel and Hamas in jeopardy.
Oil traders have been assessing the risk of an escalation in the conflict and whether it might lead to more attacks on ships traveling through the Red Sea, or affect production and exports, particularly from Iran. Crude prices have tended not to react particularly sharply to new developments in the war — that’s been going since early October 2023 — recently.
The attack “obviously strips away the hopes of cease-fire,” said Priyanka Sachdeva, senior market analyst at brokerage Phillip Nova Pte in Singapore. “Since it happened in Tehran, it’s plausible that it can trigger a wider conflict and we may witness involvement from other countries.”
Away from the Middle East, the global demand picture remains subdued as a prolonged Chinese economic slowdown continues to weigh on sentiment. Brent is set for a monthly drop of around 8%, the biggest this year, although prices are being supported by OPEC+ supply curbs and expectations the Federal Reserve will start lowering interest rates soon.
In the US, an industry group said crude inventories fell by 4.5 million barrels last week. If confirmed by official figures later on Wednesday, it would mark the longest streak of declines since January 2022.
The Fed is widely expected to keep rates on hold when it meets later Wednesday, and traders will look to Chair Jerome Powell’s remarks after for confirmation of bets that they will be cut in September.
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