Oil prices climbed on Monday as geopolitical tensions in the Middle East raised fears of potential supply disruptions.
The rise follows Israel’s intensified military actions against Iranian-backed groups, amplifying concerns about the region’s key role in global oil production.
By early Monday, Brent crude futures for November delivery increased by 51 cents, or 0.71%, reaching $72.49 per barrel.
The December contract, which will soon take over as the more active one, saw a similar rise of 50 cents, bringing it to $72.04 per barrel.
Meanwhile, US West Texas Intermediate (WTI) crude futures gained 43 cents, or 0.63%, trading at $68.61 per barrel.
The upward movement in prices comes after last week’s declines, during which Brent fell by 3% and WTI by 5%.
The declines were largely driven by concerns about weakening demand, despite China’s recent fiscal stimulus efforts.
China, as the world’s second-largest economy and top oil importer, had introduced measures aimed at restoring confidence, but these failed to significantly lift market sentiment.
Middle East conflict heightens supply concerns
Monday’s rebound in oil prices was largely attributed to fears that the conflict in the Middle East could escalate further, potentially affecting oil supplies.
Israel has ramped up its attacks on Hezbollah and Houthi forces, both of which are backed by Iran—a major oil producer and influential member of the Organization of the Petroleum Exporting Countries (OPEC).
“Investors are closely watching the situation in the Middle East,” analysts said, noting that any disruption in production or exports from the region could have significant repercussions on global oil markets.
OPEC+ supply cuts and market outlook
Compounding the supply concerns is the scheduled expiration of OPEC+’s voluntary supply cuts on December 1.
Analysts have suggested that WTI crude could test its 2021 lows, potentially falling to the $61 to $62 per barrel range if demand remains weak and production constraints are lifted.
“Despite recent policy shifts in China, it’s uncertain whether this will significantly boost fuel demand, particularly given the country’s rapid progress in transitioning to electric and decarbonized transport,” said Vandana Sycamore, an oil market analyst.
All eyes on US Federal Reserve and economic data
Later this week, traders and investors will be closely watching remarks from US Federal Reserve Chair Jerome Powell for hints about the pace of future monetary easing.
In addition, seven other Federal Reserve officials are scheduled to speak, providing further insight into the central bank’s strategy. Upcoming data on job openings, private hiring, and surveys from the Institute for Supply Management (ISM) on manufacturing and services will also be pivotal in shaping market sentiment.
With the Federal Reserve and other central banks likely to ease policy, some analysts believe an economic recovery may be imminent.
“How well demand responds to lower interest rates, and how much China’s oil demand rebounds after its major stimulus measures, will ultimately determine the direction of the oil market going forward,” said Priyanka Sachdeva of Phillip Nova, as quoted by Reuters.
As the Middle East situation continues to unfold and the global economy reacts to monetary policies, oil markets are expected to remain highly volatile in the coming weeks.
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