Tuesday, 05 November, 2024

Oil prices surge as Israel, Hamas war triggers supply concerns


Oil prices rallied while the dollar and yen advanced Monday after Hamas launched a shock attack on Israel at the weekend, sparking fresh concerns about tensions in the Middle East.

The crisis fanned concerns about supplies of crude from the region at a time when supply worries are already high owing to Saudi Arabia and Russiaā€™s output cuts.

It has also renewed fears about the impact on inflation, with energy costs a key driver of spiking prices, giving a fresh headache to central banks as they try to ease up on interest rate hikes to avoid recessions.

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The surprise attack and Israelā€™s declaration of war in response to it have left more than 1,000 dead and raised concerns that a potential broadening of the conflict could draw in the United States and Iran.

ā€œKey for markets is whether the conflict remains contained or spreads to involve other regions, particularly Saudi Arabia,ā€ said ANZ Groupā€™s Brian Martin and Daniel Hynes.

ā€œInitially at least, it seems markets will assume the situation will remain limited in scope, duration, and oil-price consequences. But higher volatility can be expected.ā€

Both main contracts surged more than five percent in early Asian business before easing back as the day wore on.

However, SPI Asset Managementā€™s Stephen Innes warned: ā€œHistorical analysis suggests that oil prices tend to experience sustained gains after the Middle East crises.

ā€œMeanwhile, stocks tend to eventually recover and trend higher after an initial period of volatility. Safe-haven assets like gold and Treasurys, which initially see gains during such crises, tend to fade from their initial price spikes as the situation stabilises.

ā€œBut with Middle East analysts considering this to be a pivotal moment for Israel, the view looks incendiary in any current scenario.ā€


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