Oil prices increased by more than $4 a barrel in early Asian trading on Monday, owing to escalating military clashes between Israeli and Hamas forces, which has increased political uncertainty in the Middle East.
Brent crude increased by 4.94 percent to $88.76 per barrel, while US West Texas Intermediate crude rose by 5.11 percent to $87.02 per barrel.
This sudden price increase signified a reversal of the recent decreasing trend caused by fears about the impact of high global interest rates on demand.
Over the weekend, the Palestinian Islamist group Hamas launched its most substantial armed attack against Israel in decades, resulting in hundreds of casualties and a series of Israeli air raids on Gaza.
The ongoing conflict might jeopardize US efforts to mediate a Saudi-Israeli settlement, putting oil supplies in danger. According to Reuters, Saudi officials notified the White House of their intentions to expand oil production next year as part of a possible deal with Israel.
An increase of this magnitude could help to alleviate the tight supply conditions caused by months of production restrictions by key producers Saudi Arabia and Russia.
Normalization of Saudi-Israeli relations may have an impact on current efforts at détente between Saudi Arabia and Iran.
The market’s focus has now switched to the probability of Iranian involvement in the attacks, further complicating the issue.
