Oil prices jumped as the crisis in the Middle East continued following the attack on Israel by Hamas on Saturday.
Brent crude rose 3.7% to $87.70/barrel and West Texas Intermediate rose 4.0% to $86.09 on fears the turmoil could spread to other oil producing countries.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, said investors are assessing the potential for the conflict to disrupt supply in the Middle East, if other countries are drawn in.
“With the Israeli government warning of a long and difficult war, there are concerns that deep and incessant retaliative strikes on Gaza could potentially bring Iran into the conflict and have an impact on the flow of energy in the region,” she said.
Over at Citi, analysts noted that “timing is everything and the attacks almost certainly postpone any Saudi/Israeli rapprochement, along with any high probability expectation of Saudi Arabia reducing or eliminating its extra 1-m b/d cut if prices resume their recent fall.”
“Risks also grow for an Israeli attack on Iran, given its support and encouragement to Hamas, with timing an open question.”
“Meanwhile, any expansion of battles will have potential repercussions on oil markets,” Citi said.