Oil prices increased after recording a second consecutive weekly gain, driven by heightened tensions in the conflict between Israel and Hezbollah. Brent crude rose toward $75 a barrel, gaining 4% in its largest weekly advance since April, while West Texas Intermediate traded above $71. On Sunday, Hezbollah launched approximately 115 rockets, missiles, and drones toward northern Israel, prompting counterattacks against the Iranian-backed group in Lebanon.
The escalation has reintroduced a risk premium into the oil market, contributing to Brent’s rise of over 8% from the lowest levels since 2021 reached earlier this month. However, optimism surrounding last week’s Federal Reserve rate cut, which was expected to boost consumption, has been tempered by concerns regarding a deteriorating fuel demand outlook. This has led hedge funds to adopt their most bearish stance on diesel in recorded history.
“Crude may enter a holding pattern, consolidating last week’s gains,” remarked Vandana Hari, founder of Vanda Insights in Singapore. “While market sentiment remains buoyed by the significant Fed cut, renewed downward pressure on crude prices may emerge as attention shifts back to the grim demand landscape.”
On Tuesday, the Organization of the Petroleum Exporting Countries (OPEC) is set to release its annual World Oil Outlook, which may provide further insights into global consumption trends.
In parallel, China’s economic recovery appears sluggish, with recent data revealing cuts in government spending and a rising youth unemployment rate, now at its highest level this year. According to the Securities Daily, Chinese banks may implement another round of mortgage rate cuts this year to bolster faltering consumption.
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