Oil prices extended gains on Tuesday on concerns that escalating tensions in the Middle East could disrupt regional oil supplies, while impending U.S. interest rate cuts boosted the global economic outlook and fuel demand.
Brent crude futures were up 93 cents, or 1.18%, at $79.95 a barrel at the time of writing, while U.S. crude futures were up 92 cents, or 1.22%, at $75.74 a barrel.
Concerns
In one of the largest clashes in more than 10 months of cross-border fighting, Hezbollah fired hundreds of rockets and drones into Israel on Sunday, and the Israeli military said it struck targets in Lebanon with about 100 aircraft to thwart a larger attack.
This escalation raises fears that the war will expand to include Iran and the United States, Israel’s main ally.
“Israel’s preemptive strike on Lebanon over the weekend to prevent an imminent Hezbollah attack could see oil prices rise this morning, with WTI looking to extend its initial recovery to $77.50,” IG market analyst Tony Sycamore said in a note.
Crude rose more than 2% on Friday after Federal Reserve Chairman Jerome Powell backed interest rate cuts soon.
Monetary policy
“The prospect of monetary easing has boosted sentiment in the commodity market,” analysts at ANZ Bank said in a note, adding that they expect the Federal Reserve to implement a gradual series of interest rate cuts.
However, oil prices fell last week as weak outlooks for major economies weighed on fuel demand, the bank added.
The U.S. Department of Energy said Friday it had purchased nearly 2.5 million barrels of oil to help replenish the Strategic Petroleum Reserve.
The number of oil rigs operating in the United States remained unchanged at 483 last week, Baker Hughes said in its weekly report.
