Oil prices spike as Hamas attacks Israel

Both Brent and WTI crude oil rose 5% this morning, as investors grew concerned about political instability in the Middle East.

At the opening of the trading session on the morning of October 9, each barrel of Brent increased by 4.9% to 88.7 USD. US crude oil WTI also increased by 5.1% to 87 USD.

This development reverses the trend last week - when the market recorded the biggest weekly decline since March. Specifically, Brent lost 11% and WTI fell more than 8% due to concerns about the impact of high interest rates on global oil demand.

However, on October 7, the militant group Hamas attacked Israel, launching the largest military campaign against the country in decades. Israel retaliated with repeated airstrikes in the Gaza Strip. Israel said on October 8 that clashes with Hamas gunmen had killed at least 600 Israeli civilians and soldiers, while Gaza officials reported the death toll at 370.

"Political uncertainty in the Middle East will support oil prices. Volatility is expected to be greater in the coming period," analysts at ANZ commented.

Smoke rises in an Israeli city after a shelling from Gaza on the morning of October 7. Photo: Reuters

The event could derail US efforts to reconcile Saudi Arabia and Israel. If Saudi Arabia normalizes relations with Israel, it will have a defense agreement with the US and will have to increase oil production. This would help ease the supply shortages of the past few months caused by Russia and Saudi Arabia cutting crude production.

The market is now waiting for Iran’s response, as Israel has accused it of involvement in the attack. US officials said on October 8 that they were looking into Iran’s role but had not yet seen evidence.

"This attack will have a major and long-term impact on the oil market if there is a sustained reduction in supply and disruption to shipping. If Western countries believe that Iran played a role in this event, the supply and exports from Iran will certainly be threatened," said Vivek Dhar, an analyst at Commonwealth Bank.

Ha Thu (according to Reuters)

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