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Oil prices were up more than $3 a barrel in Asian trade on Monday as military clashes between Israel and the Palestinian Islamist group Hamas deepened political uncertainty across the Middle East and raised concerns about supplies.
Brent crude rose $3.10, or 3.67%, to $87.68 a barrel by 0400 GMT, while U.S. West Texas Intermediate crude was at $86.05 a barrel, up $3.26, or 3.94%. Both benchmarks had jumped more than $4 a barrel earlier, before easing slightly.
“Increasing geopolitical risk in the Middle East should support oil prices … higher volatility can be expected” analysts from ANZ Bank said in a client note.
The surge in oil prices reversed last week’s downtrend – the largest weekly decline since March – in which Brent fell about 11% and WTI retreated more than 8% amid concerns about high interest rates and their impact on global demand.
Hamas on Saturday launched the largest military assault on Israel in decades, killing hundreds of Israelis and triggering a wave of retaliatory Israeli air strikes on Gaza that have also killed more than 400 people.
“The risk premium on oil is rising due to the prospect of a wider conflagration that could spread to nearby major oil producing nations such as Iran and Saudi Arabia,” energy analyst Saul Kavonic told Reuters.
The eruption of violence threatens to derail U.S. efforts to broker a rapprochement between Saudi Arabia and Israel, in which the kingdom would normalise ties with Israel in return for a defence deal between Washington and Riyadh.
