Brent crude pushes toward $80 a barrel on fears Middle East war will threaten supply

By William Watts

Oil futures were up more than 2% Monday, building on last week's strong gains as investors monitored developments in the Middle East amid fears a more direct conflict between Israel and Iran could threaten crude supplies from the region.

Price moves

-- West Texas Intermediate crude CL00 for November delivery CL.1 CLX24 rose $1.97, or 2.6%, to $76.34 a barrel on the New York Mercantile Exchange.

-- December Brent crude BRN00 BRNZ24, the global benchmark, was up $1.73, or 2.2%, at $79.78 a barrel on ICE Futures Europe.

Market drivers

Brent crude rose 9.1% last week, its largest weekly gain since October 2022. WTI rose the same amount, the biggest weekly gain for the U.S. benchmark since March 2023.

Israel has vowed to retaliate for a ballistic missile attack last week by Iran. Hezbollah on Monday fired rockets at Haifa in northern Israel. The Israeli military stepped up its bombardment of northern Gaza and southern Lebanon.

Read: Bets oil will hit $100 a barrel surge on fears of wider Middle Eastern war

Monday marks one year since Iran-backed Hamas launched a deadly attack on southern Israel, kicking off the Gaza war. Israel last month stepped up attacks on Iran-backed Hezbollah in Lebanon, killing the militia's leader.

Oil prices, while seeing episodes of volatility, have weakened over the past year, with the conflict so far failing to significantly affect flows of crude from the Middle East while concerns have mounted about demand from China, the world's largest crude importer.

"Israel targeted more sites in Lebanon on Sunday night, but the bigger risk for markets would be an Israeli strike on Iran's nuclear facilities or on its oil fields. In this extreme scenario, oil would likely surge more than $10, and fears about an escalation in tensions could lead to greater demand for safe havens like the dollar," Kathleen Brooks, research director at XTB, said in a note.

See: Israeli strikes on Iran's 'oil island' could send crude prices soaring

-William Watts

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10-07-24 0748ET

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