Chris McGrath/Getty Images News
Oil prices will remain under observation as Israel and the Lebanese paramilitary group Hezbollah exchanged the heaviest rocket fire in 10 months of war on Sunday, fuelling fears of a wider conflict in the Middle East.
Hezbollah fired hundreds of rockets on northern Israel in retaliation for the killing of a senior commander last month. Israel said it had launched airstrikes on rocket launchers across southern Lebanon to prevent an impending Hezbollah attack.
Both sides have signaled they want to avoid further escalation. Hezbollah leader Hassan Nasrallah said the group had attacked an intelligence base and the operation was over. “At this current stage, the country (Lebanon) can breathe a sigh of relief,” he added, seeking to allay fears of reprisals.
Israeli Defense Minister Yoav Gallant said he had spoken with U.S. Defense Secretary Lloyd Austin. “We discussed the importance of avoiding regional escalation and working together to ensure Israel’s defense and regional stability.”
Oil futures were higher early Monday. Front-month Nymex crude (CL1:COM) for October delivery rose by 1.2% to 75.76 USD/bbl, and the October price for Brent crude oil (CO1:COM) +1.2% to USD 79.99/barrel.
Warren Patterson, head of commodity strategy at ING, said oil prices had recovered after Fed Chairman Powell signaled that interest rate cuts would begin next month.
“Developments in the Middle East over the weekend have given oil prices a further boost this morning,” noted Patterson. “We expect any recovery from these developments to be short-lived unless Iran becomes more directly involved, as this would significantly increase the risks to oil supplies.”
Meanwhile, talks between Hamas and Israel over a ceasefire in Egypt have not resolved all differences, according to a US official.
