Oil prices surged by more than $1 on Tuesday, reversing losses from the previous day, as concerns over a potential escalation in the Middle East overshadowed fears of a possible U.S. recession impacting demand.
By 0037 GMT, Brent crude futures had risen by $1.25, or 1.6%, reaching $77.55 per barrel, while U.S. West Texas Intermediate (WTI) crude futures climbed $1.35, or 1.9%, to $74.29. This uptick follows a Monday drop of approximately 1% for both benchmarks, which was influenced by declining global stock markets. The decrease in oil prices was tempered by worries that Iranian retaliation for the recent assassination of a Hamas leader in Tehran might escalate into a broader regional conflict.
Hiroyuki Kikukawa, president of NS Trading (a unit of Nissan Securities), attributed the recent price increase to heightened fears of an expanding Middle East conflict, which prompted renewed buying activity. Kikukawa noted that while the market has priced in a retaliatory response from Iran, the extent of such an attack and Israel’s countermeasures will be critical in determining future price movements. Should the conflict intensify, oil prices are expected to rise; however, if contained, gains may be modest, similar to the situation in April during a comparable escalation.
The situation remains tense as Israel and the U.S. prepare for potential further escalation, with Iran, Hamas, and Hezbollah vowing retaliation for recent Israeli actions against key figures. U.S. Secretary of State Antony Blinken has described the current moment as “critical” for the region, with the U.S. urging other nations to communicate to Iran the adverse effects of further escalation.
In a separate development, U.S. officials reported that at least five American personnel were injured in an attack on a military base in Iraq on Monday. The connection of this attack to the ongoing tensions remains unclear.
Additionally, oil supply concerns have been exacerbated by a decline in Venezuelan oil exports. The OPEC member has faced disruptions in crude processing units, leading to reduced stock availability from its primary production area and delays in cargo loading, according to documents and vessel monitoring data.
