New York — Oil prices were up by more than 2% on Monday, gaining for a fifth consecutive session on intensifying conflict in the Middle East that could tighten global crude oil supplies.
Brent crude futures were up $1.81, or 2.3%, at $81.47 a barrel by 1658 GMT. U.S. West Texas Intermediate crude futures rose $2.21, or 2.9%, to $79.05.
The U.S. Defense Department said over the weekend that it will send a guided missile submarine to the Middle East as the region braces for possible attacks on Israel by Iran and allies.
“We’re piling assets one on top of the other and giving the impression that, if this turns hot, it could also turn ugly,” said Bob Yawger, director of energy futures at Mizuho in New York.
Iran and Hezbollah have vowed to retaliate for the assassinations of Hamas leader Ismail Haniyeh and Hezbollah military commander Fuad Shukr. An attack could widen the Middle Eastern conflict, while tightening access to global crude supplies and boosting prices.
Such an assault could lead the United States to place embargos on Iranian crude exports, potentially affecting 1.5 million barrels per day of supply, Yawger said.
Meanwhile, Israeli forces continued operations near the southern Gaza city of Khan Younis on Monday following an airstrike over the weekend on a school compound that killed at least 90 people, according to the Gaza Civil Emergency Service. Israel said the death toll was inflated. Hamas cast doubt on its participation in new ceasefire talks on Sunday.
“We see higher prices this week that could advance the crude benchmarks further by around $3/bbl,” said oil analyst Jim Ritterbusch of Ritterbusch and Associates in Florida in a note.
Brent gained 3.7% last week while WTI rose 4.5%, buoyed by stronger-than-expected U.S. jobs data that fed hopes for an interest-rate cut in the world’s biggest consumer of crude oil.
“Support is coming from last week’s better-than-expected U.S. data, which eased fears of a U.S. recession,” said IG markets analyst Tony Sycamore.
Three U.S. central bankers said last week that inflation appeared to be cooling enough for the Federal Reserve to cut interest rates as soon as next month.
Rate cuts tend to raise economic activity, which increases the use of energy sources such as oil.
Investors were looking ahead to U.S. consumer price index data for July on Wednesday, which is expected to show month-on-month inflation ticked up to 0.2% after a minus-0.1% reading in June.
Oil prices drew support when consumer prices in China, the biggest global oil importer, rose faster than expected in July.
On Monday Russia evacuated civilians from parts of a second region next to Ukraine after Kyiv increased military activity near the border only days after its biggest incursion into sovereign Russian territory since the start of the war in 2022.
Reporting by Laila Kearney in New York and Robert Harvey and Paul Carsten in London, Colleen Howe in Beijing and Florence Tan in Singapore Editing by Jason Neely, David Goodman, David Evans, David Gregorio and Rod Nickel – Reuters
