Oil prices rise 1% on fears of escalating Middle East conflict

Oil prices rose around 1% a barrel on Friday as investors priced in fears of an escalation of conflict in the Middle East which could disrupt oil supplies, after reports that the U.S military had struck Iranian targets in Syria.

Brent crude futures for December rose 93 cents or roughly 1.1%, to $88.86 a barrel by 1254 GMT. The U.S. West Texas Intermediate contract for December climbed 91 cents, also about 1.1%, to $84.12 a barrel. Both benchmarks were up by more than $2 a barrel earlier in the session.

Two U.S. fighter jets struck weapons and ammunition facilities in Syria on Friday in retaliation for attacks on U.S. forces by Iranian-backed militia since the Gaza war erupted.

Iranian Foreign Minister Hossein Amirabdollahian said at the United Nations on Thursday that if Israel’s offensive against Hamas did not stop, the United States will “not be spared from this fire”.

Separately, projectiles hit two Egyptian Red Sea towns on Friday injuring several people, sources and officials said, showing the risk of regional spillover from the conflict.

Meanwhile, Israeli forces carried out their biggest Gaza ground attack in their 20-day war with Hamas overnight, after Prime Minister Benjamin Netanyahu said Israeli troops were still preparing for a full ground invasion.
RED LINES The developments have so far not directly impacted oil supplies, but raise fears that exports from major crude producer and Hamas-backer Iran could be disrupted, among other key producers in the Gulf.

“(It) remains incredibly difficult even for the most knowledgeable regional watchers to make high conviction calls about the trajectory of the current crisis, as the red lines that could bring more players onto the battlefield remain largely indiscernible,” RBC Capital analyst Helima Croft said.

Goldman Sachs analysts said they retained their first-quarter 2024 Brent crude price forecast at $95 a barrel but added that lower Iranian exports could cause baseline prices to rise by 5%.

Prices could jump 20% in the less likely scenario of an interruption of trade through the Strait of Hormuz where 17% of global oil production transits, the bank said.

Meanwhile, prospects for oil demand remain circumspect.

On Thursday, data showed the U.S. economy grew at its fastest pace in nearly two years in the third quarter, bucking the trend of macro-economic gloom that has plagued much of Europe.

“It remains to be seen whether energy markets as a whole can keep on ignoring these millstones around the neck of economic growth because they will continue to haunt the consciousness of the oil suite for some time,” said John Evans of oil broker PVM

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This article was originally published by Indiatimes.com. Read the original article here.