Oil prices experienced a significant increase in Asian trading on Thursday following Israel’s intensified stance against Iran. Additionally, market focus shifted towards upcoming business activity data from major economies set to be released in the coming days.
After enduring two weeks of substantial losses due to concerns over declining demand, crude prices saw some positive movement this week, although overall gains remained limited. Furthermore, prices took a hit on Wednesday following the release of U.S. inventory data indicating a larger-than-expected build in crude stockpiles.
WTI crude oil for December delivery climbed 1% to $75.72 a barrel, while Brent crude rose 1.1% to $71.57 a barrel by 21:24 ET (01:24 GMT).
Israeli Defense Minister Advocates for Strike on Iran
Speculation of heightened tensions in the Middle East arose after Israeli Defense Minister Yoav Gallant suggested that striking Iran would showcase Israel’s strength to the world. This statement came amidst growing anticipation of a retaliatory strike against Iran following an attack on October 1, marking Tehran’s second major assault on Israel in six months.
The fear of an escalation in conflict has been a significant factor influencing oil prices, with traders factoring in a risk premium on crude amid concerns of potential attacks on Iran’s oil and nuclear infrastructure by Israel. Israel also escalated its offensive against Hamas and Hezbollah this week, leading to retaliatory actions from the two military groups.
Despite efforts by the U.S. to mediate peace in the Middle East before the November 5 presidential election, the likelihood of a ceasefire remains low.
Focus on US and EU PMIs
Thursday also saw attention on key Purchasing Managers Index (PMI) readings from the euro zone and the U.S., offering insights into the state of the world’s largest economies. The euro zone PMI is expected to remain in contraction, while the U.S. PMI could benefit from strength in the services sector.
Any signs of resilience in the U.S. economy may lead to reduced expectations of interest rate cuts by the Federal Reserve, a notion that has impacted oil markets in recent weeks. The strength of major global economies suggests a positive outlook for crude demand, although sluggish growth in China, a top oil importer, could offset this trend.
Overall, the surge in oil prices due to geopolitical tensions and economic data highlights the interconnected nature of global events and their impact on financial markets. Investors and individuals alike should remain informed and vigilant to navigate through these volatile times and make informed decisions regarding their finances.