Oil prices experienced stability after a brief surge of 1% on Wednesday, influenced by escalating tensions in the Israel-Hamas conflict spreading to Lebanon. Israel’s response to a rocket attack from Hezbollah by initiating strikes in southern Lebanon raised concerns of a widening conflict.
Reports indicated that strikes from Lebanon into northern Israel caused injuries to seven individuals. In retaliation, Israel launched airstrikes in southern Lebanon, resulting in casualties and injuries.
The cross-border strikes between Lebanon and Israel coincided with anticipation of an assault on the southern city of Rafah by Palestinians following unsuccessful ceasefire negotiations in Egypt. Despite the involvement of the United States, Israel, Egypt, and Qatar in talks, no significant progress has been made, and there are no signs of further discussions.
Oil Prices Stable Amid Escalating Israel-Hamas Conflict (Credits: Bloomberg)
As of Wednesday, West Texas Intermediate (WTI) oil was marginally down by 0.18% at $77.33, while Brent crude saw a slight increase of 0.12% at $82.67. Oil market movements were also influenced by optimism regarding OPEC’s optimistic growth projections.
However, this was juxtaposed against the weekly inventory report from the U.S. Energy Information Administration (EIA), which indicated a decline in U.S. fuel stocks. Nonetheless, the reduction was insufficient to offset a significant increase in crude oil inventory, estimated at 12 million barrels for the week ending February 9.
Market concerns were further fueled by the U.S. Federal Reserve’s decision to postpone anticipated interest rate cuts. Tuesday’s inflation report revealed a 3.1% increase in the consumer price index (CPI) in January compared to the previous year, exceeding expectations and indicating a 0.3% rise from December.
This development led to a decline in the U.S. stock market on Tuesday and raised speculation among investors that the Fed might delay implementing interest rate cuts.
Tamas Varga, an analyst at PVM, highlighted the prevailing impact of geopolitical events, particularly the Israel-Gaza situation and Ukraine’s conflict with Russia, on market sentiment. Despite disappointing U.S. inflation data, these geopolitical tensions weighed heavily on market dynamics.
