Oil fell after Israel committed military forces to Gaza with a more cautious approach than it initially vowed, bolstering speculation that the fighting may remain contained despite rhetoric from Iran.
Global benchmark Brent dropped toward $89 a barrel, after rising almost 3% on Friday as Israel stepped up operations, while West Texas Intermediate fell near $84.
While Israel has sent troops and tanks into the northern Gaza Strip in retaliation to the Oct. 7 attack, it’s taking a day-by-day approach.
Oil markets have been transfixed by the conflict in Gaza on concerns that it could spread beyond the enclave and Israel.
The Middle East accounts for a third of global crude supplies, and there are fears that an escalation of the war could lead to attacks on oil tankers, threats to maritime chokepoints, and a reduction in exports from Tehran.
Before crude futures began trading on Monday in Asia, both Tehran and Washington had warned that the conflict could still spread. Iran said the war may “force everyone to take action.” The US, meanwhile, saw an “elevated risk” of spillover, according to National Security Advisor Jake Sullivan.
Iran is the main backer of Hamas, which has been designated as a terrorist group by the US and the European Union. Tehran also supports Hezbollah in southern Lebanon, which has forces positioned along Israel’s northern border and has the potential to open up a second front in the conflict.