Oil prices continued their upward trajectory on Wednesday, driven by reports of Iran ordering a retaliatory strike against Israel. This move follows Israel’s recent assassination of a senior Hamas leader within its borders.
Brent crude oil surged past $81 per barrel, extending a 3.6% gain from the previous session. West Texas Intermediate also climbed above $78 per barrel. The New York Times reported that Iran’s Supreme Leader, Ayatollah Ali Khamenei, has commanded a direct attack on Israel. This development comes after the assassination of the Hamas political leader in Tehran, shortly after a Hezbollah leader was killed in Beirut.
In response to the escalating conflict, U.S. officials continue to advocate for a cease-fire in Gaza, though efforts have become increasingly difficult following the death of Hamas leader Ismail Haniyeh, a key figure in the peace negotiations. Additionally, there has been an uptick in the purchasing of call options, which profit from rising oil prices, following the recent attacks.
This escalation in tensions precedes a scheduled meeting of key members of the Organization of the Petroleum Exporting Countries (OPEC) and its allies. Expectations are that the meeting, set for later Thursday, will be routine with no immediate changes to the planned restoration of oil production in the fourth quarter.
Vivek Dhar, an analyst at Commonwealth Bank of Australia, commented, “Oil markets are understandably concerned that the assassination of Haniyeh could involve Iran more directly in the conflict with Israel, potentially jeopardizing Iran’s oil supply and infrastructure.”
Despite a decline in July, crude oil prices remain higher this year. Concerns about demand from major importer China and ongoing Middle East tensions—where a significant portion of global crude is sourced—continue to drive the market. Additionally, OPEC+ production cuts and speculation about potential U.S. monetary easing, following comments from Federal Reserve Chair Jerome Powell on possible interest-rate cuts in September, are contributing to the bullish sentiment.
In other developments, U.S. crude inventories fell by 3.4 million barrels last week, marking the longest streak of declines since January 2022. Levels at the Cushing storage hub also decreased.
