Price Action
- West Texas Intermediate crude (CL00, +2.15%) for November delivery (CL.1, +2.15% CLX23, +2.15%) rose $1.93, or 2.2%, to $88.59 a barrel. The contract settled flat at $86.66 a barrel on the New York Mercantile Exchange after losing 1.2% on Monday.
- December Brent crude (BRN00, +1.84% BRNZ23, +1.84%), the global benchmark, gained $1.72, or 1.9%, to $91.62 a barrel. On Tuesday, the contract gained 25 cents, or 0.3%, to $89.90 a barrel on ICE Futures Europe.
Market Drivers
An explosion rocked a Gaza City hospital on Tuesday, causing significant casualties among those seeking shelter from the ongoing war. The Hamas-run Health Ministry reported a death toll of 500 and rising. Both Israel and Hamas have exchanged blame for the blast. Hamas claims it was caused by the Israeli military, while the Israeli military contends that it was a misfired rocket from a Gaza-based militant group.
The incident has heightened tensions in the region, leading to the cancellation of a planned Arab summit with President Biden by Jordan. The country’s foreign minister, Ayman Safadi, expressed concern about the escalating violence, stating that it is “pushing the region to the brink.”
Hospital Explosion Triggers Protests in Middle East
The recent hospital explosion has sparked widespread protests throughout the region, targeting U.S. and Israeli embassies and consulates. Demonstrations erupted in Jordan, Turkey, Tunisia, Lebanon, Iran, and other countries, as reported by various media outlets.
Analysts are now warning of potential escalation from Iran and Hezbollah in the aftermath of the tragedy. Benjamin Picton, a senior macro strategist at RaboResearch, emphasized the increased risk of a “harsh response” from Iran, including possible actions against the United States. Likewise, Hezbollah has declared a day of “unprecedented anger,” suggesting tensions may rise even further.
As attention shifts to Iran’s involvement, experts are closely monitoring the situation to determine if the country will open up a new front in the north. Should this occur, Rabo’s forecast of oil prices reaching $100 per barrel before the end of the year may indeed materialize. Such a surge would have significant implications, including heightened inflationary pressures and the potential for higher interest rates.
The fear of Iranian involvement has also led to a surge in crude prices. Concerns over increased enforcement of sanctions by the United States, which could restrict exports and further tighten global supplies, have caused market volatility. Jay Hatfield, CEO of Infrastructure Capital Management, has warned that Iran’s participation in the conflict would put its daily oil production of 3 million barrels at risk.
Read: 70% chance Israel-Hamas war spreads beyond Gaza, threatening oil, strategist warns
(Reported by Myra P. Saefong and Williams Watts)
