Oil prices surged during Asian trade on Thursday, continuing the previous session’s gains, as the killing of a Hamas leader in Iran raised concerns about a broader conflict in the Middle East and its potential impact on oil.
Global benchmark Brent crude futures increased by 0.9% to $81.55 a barrel, and US West Texas Intermediate crude futures rose by 1% to $78.67 a barrel, extending their 4% jump from the previous session.
The recent killings of Hamas leader Ismail Haniyeh in Tehran and the most senior military commander of Hezbollah in Beirut have heightened worries that the ongoing war in Gaza could escalate into a wider regional conflict, potentially disrupting oil supply.
Analyst Vivek Dhar at the Commonwealth Bank of Australia stated, “Oil markets are rightfully concerned that the assassination of Haniyeh may draw Iran into the conflict with Israel, jeopardizing Iran’s oil supply and related infrastructure.”
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This concern has also sparked worries about Iran’s control of the Strait of Hormuz, a critical waterway for global oil supply. Dhar noted that a blockade of the strait could disrupt 15-20% of the global oil supply, posing a significant risk to oil markets.
In addition to the Middle East tensions, a weaker US dollar and robust export demand have contributed to the increase in oil prices. Data from the US Energy Information Administration showed a 3.4 million-barrel decline in US crude oil stockpiles, while the US dollar index continued to weaken, boosting oil demand from investors holding other currencies.
However, concerns about Chinese demand have tempered investor confidence and may limit further upside in oil prices. Recent data from China revealed a decline in manufacturing activity, signalling potential challenges for oil demand from the world’s largest oil consumer.
