Global benchmark Brent rose near $80 a barrel, after falling 4.5% over the previous three sessions, with West Texas Intermediate around $76. Hamas said Israel killed its political leader, Ismail Haniya, in an airstrike in Iran. It followed an earlier Israeli attack on Beirut that killed a senior Hezbollah commander.
In recent days, tension in the Middle East region has been fueled by a Hezbollah strike in the Israeli-controlled Golan Heights that killed 12 children, potentially jeopardizing ongoing ceasefire talks between Israel and Hamas.
Crude prices do not react
Oil traders are assessing the risk of the conflict escalating and whether it could lead to more attacks on ships traveling through the Red Sea or affect production and exports, particularly from Iran. Crude prices tend not to react particularly strongly to new developments in the war – which has been ongoing since early October 2023.
The attack “obviously takes away hopes for a ceasefire,” said Priyanka Shahdeva, senior market analyst at brokerage Phillip Nova Pte in Singapore. “Since it happened in Tehran, it stands to reason that it may trigger a wider conflict and we may see other countries getting involved.”
Demand is subdued
Away from the Middle East, the global demand picture remains subdued as a prolonged slowdown in the Chinese economy continues to weigh on sentiment. Brent is expected to post a monthly decline of around 8%, the biggest this year, although prices are supported by OPEC+ supply constraints and expectations that the US Federal Reserve will soon start cutting interest rates.
In the US, an industry group said crude inventories fell by 4.5 million barrels last week. If confirmed by official data later on Wednesday, it would mark the longest run of declines since January 2022.
The Fed is widely expected to keep interest rates on hold when it meets later on Wednesday, and traders will look to remarks from Chairman Jerome Powell afterward for confirmation of bets they will cut in September.
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