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Crude oil prices jumped by more than $4 earlier today amid continued fighting between Hamas and Israel that began on Saturday.
Brent crude was trading close to $88 per barrel in morning trade in Asia, and West Texas Intermediate was changing hands at over $86 per barrel, both up by over 3% from Friday’s close. By the time of writing, prices had retreated modestly, with WTI slipping below $86 per barrel.
The price surge follows the biggest attack on Israel in years, after in the early hours of Saturday Hamas fighters entered the country by land, sea, and even air, and attacked Israeli towns.
Israel retaliated with a series of air strikes on Gaza. Prime Minister Benjamin Netanyahu has declared war on Hamas, vowing a “mighty vengeance” on the group.
To date, more than a thousand people have been killed in the latest flare-up of the conflict, with dozens of Israelis taken hostage to Gaza as well.
Oil prices were quick to react to the deterioration in Middle Eastern security and will likely stay vulnerable to more wild swings as the situation develops.
“Increasing geopolitical risk in the Middle East should support oil prices… higher volatility can be expected” ANZ Bank analysts said in a note quoted by Reuters.
Goldman Sachs analysts, meanwhile, highlighted two more potential consequences of the latest clash between Israel and Hamas.
First, they wrote, the latest events might delay the normalization between Israel and Saudi Arabia that the two have been working on with U.S. involvement. Second, with Iran’s involvement in the Hamas attack, the future outlook for Iranian oil supply had changed for the worse, Bloomberg reported.
On the other hand, per a Wall Street Journal report, Saudi Arabia had indicated it was willing to consider rolling back production cuts next year if prices went too high. The report cited Saudi and U.S. officials as saying this, noting it was a marked departure on the part of Ryiadh from its attitude to U.S. calls for more oil production last year.