Oil prices rise amid Middle East tensions, expectations of U.S. interest rate cuts
Date
8/26/2024 5:42:13 AM
(MENAFN) Oil prices saw an increase in early Asian trading on Monday, driven by concerns over escalating tensions in the Middle East and optimistic expectations regarding U.S. interest rate cuts. brent crude futures climbed by 37 cents, or 0.5 percent, reaching USD79.39 per barrel, while U.S. crude futures also rose by 36 cents, or 0.5 percent, settling at USD75.19 per barrel by 2300 GMT. The rise in prices follows a significant escalation in regional conflict, with Lebanon’s Hezbollah launching hundreds of rockets and drones into Israel. In response, the Israeli military conducted airstrikes on targets in Lebanon, aiming to prevent a larger assault.
The heightened conflict raises concerns that the situation in Gaza could expand into a broader regional conflict, potentially involving Iran, which backs Hezbollah, and drawing in the United States, a key ally of Israel. Market analysts, such as Tony Sycamore from IG, have noted that the recent Israeli strike on Lebanon could contribute to an increase in oil prices, with WTI crude potentially extending its recovery towards USD77.50 per barrel.
The rise in crude oil prices also reflects the positive impact of anticipated U.S. interest rate cuts, which have buoyed sentiment in the commodity markets. Federal Reserve Chairman Jerome Powell's support for rate cuts has led to a more optimistic global economic outlook and increased fuel demand. Analysts at ANZ Bank predict a series of gradual rate cuts by the Federal Reserve, further supporting oil prices. Despite this, oil prices experienced a decline last week due to weak economic forecasts for major economies, which dampened fuel demand. Additionally, the U.S. Department of Energy's recent purchase of nearly 2.5 million barrels of oil for the Strategic Petroleum Reserve and the stable number of oil rigs operating in the U.S., which remained at 483, also influenced market dynamics.
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