On Monday, Oil prices increased more than 2 percent as military conflicts between the Palestinian group Hamas and Israel ignited fears of a comprehensive clash in the Middle East.
Brent crude was up $2.28, or 2.7 percent, to $86.86 a barrel by 0859 GMT, while US West Texas Intermediate crude was at $85.23 a barrel, up $2.44 or about 3 percent. Both benchmarks surged by more than $4 a barrel earlier in the session.
The increase in oil prices reversed last week’s downtrend — the largest weekly drop since March — in which Brent dropped nearly 11 percent and WTI withdrew more than 8 percent as a darkening macroeconomic outlook intensified concerns regarding international demand.
While the underlying supply-demand balance is not affected, said Tamas Varga of oil broker PVM, “any rise in uncertainty in the Middle East usually leads to an upsurge in oil prices and it is no different this time around.”
Hamas launched the largest military attack on Israel on Saturday in decades, initiating a wave of retaliatory Israeli air strikes on Gaza.
The outbreak of violence endangers derailing US measures to broker a rapprochement between Saudi Arabia and Israel, in which the Kingdom would normalize links with Israel in return for a defense agreement between Washington and Riyadh.
Saudi officials reportedly on Friday told the White House that they were keen to boost output next year as part of the suggested Israel deal. Saudi Arabia and Russia have agreed to a combined 1.3 million barrels per day (bpd) voluntary cut until the end of 2023.
