Oil prices continued their upward momentum for the fifth consecutive session on Monday, building on the previous week’s gains of over 3%, as concerns about a US recession subsided and ongoing geopolitical tensions in the Middle East added support to the market. Brent crude futures saw an increase to $80.39 per barrel, while US West Texas Intermediate crude futures rose by 88 cents, reaching $77.72 per barrel.
The recent rise in prices was bolstered by better-than-expected economic data from the US, which helped to alleviate recession worries. Additionally, there is growing unease about potential retaliation from Iran following the assassinations of key figures in Hamas and Hezbollah by Israel. Analysts like Tony Sycamore from IG Markets believe that it is only a matter of time before Iran acts on its promises of retribution.
Iran and Hezbollah have vowed to respond to the killings of Hamas leader Ismail Haniyeh and Hezbollah’s military commander Fuad Shukr. This looming threat has kept the market on edge, with ING’s head of commodities research, Warren Patterson, noting that the market is still anticipating Iran’s response.
The situation in the Middle East remains volatile, with Israel’s intensified military actions in Gaza over the weekend further complicating matters. An airstrike on a school compound resulted in significant casualties, though the exact numbers are disputed. Meanwhile, Hamas expressed scepticism about resuming ceasefire talks, further fuelling uncertainty in the region.
Last week’s price increases were driven not only by the geopolitical situation but also by economic data and speculation about a potential US interest rate cut. Encouraging signs of cooling inflation have led some US central bankers to suggest that the Federal Reserve might lower interest rates as soon as next month. Additionally, China’s consumer prices rose more than expected in July, and US jobless claims dropped more than anticipated, contributing to the positive sentiment in the oil market.
On the geopolitical front, Russia’s recent evacuation of civilians from areas near Ukraine after increased military activity by Kyiv adds another layer of complexity to the global landscape. This development follows Ukraine’s largest incursion into Russian territory since the conflict began in 2022.
Oil prices are experiencing sustained growth due to a combination of easing economic concerns in the US and heightened geopolitical risks in the Middle East, with market participants closely monitoring these evolving situations.
Challenger Energy Group plc (LON:CEG) is a Caribbean and Atlantic margin focused oil and gas company, with a range of petroleum assets located onshore in Trinidad and Tobago, and Suriname, and offshore in the waters of The Bahamas and Uruguay.
