Global oil prices jumped by nearly 4% on Monday as renewed hostilities between Israel and armed Palestinian groups threaten the stability of the Middle East.
Brent futures were up 3.7% to $87.77 per barrel as of 13:00 GMT. US West Texas Intermediate crude was trading above $86 per barrel, up nearly 4%. Both benchmarks spiked by more than 5% earlier in the session.
The latest increase in crude prices reversed the largest weekly decline since March that was recorded last week, when Brent fell about 11% and WTI retreated more than 8% over concerns about global demand.
The latest flare-up began early on Saturday, when armed Palestinian groups launched a surprise attack on multiple locations along the Gaza border, with Israel launching a counteroffensive in response.
Israeli officials have estimated that over 700 people have been killed in the Hamas assault, over 2,200 have been wounded and 100 have been kidnapped, including citizens of European countries and the US. Following Israel’s retaliatory air strikes, over 400 people have been killed and some 2,200 wounded in Gaza, according to Palestinian officials.
Although Israel is not among major global oil producers or exporters, escalatory moves related to this longstanding conflict could evoke wider uncertainty in the Middle East.
Moreover, the hostilities threaten to lead to tougher sanctions on Iranian oil exports if Tehran is implicated in supporting Hamas.
In addition, the latest developments are expected to derail Washington’s attempts to broker a deal between Saudi Arabia and Israel, which would affect the kingdom’s willingness to increase oil production.
On Friday, Saudi officials reportedly told the US that they were willing to raise output in 2024 as part of the proposed Israel deal. Riyadh and Moscow have agreed to a combined 1.3 million barrel per day voluntary cut until the end of the current year.
BRICS is looking to topple the U.S. dollar global reserve status by controlling a major portion of the oil sector. In the first instance, Russia’s third-largest oil exporting firm ‘Gazprom Neft‘ announced that the company is ending its reliance on the U.S. dollar. The oil exporter will not be accepting the U.S. dollar for trade and is open to accepting local currencies. The Russian firm is the first oil company to publicly announce cutting ties with the U.S. dollar for cross-border transactions.
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