Brent rises as geopolitical tension grows in the Middle East

The front-month ICE Brent contract gained $1.67/bbl on the day, to trade at $81.92/bbl at 09.00 GMT.

PHOTO: Getty Images

Upward pressure:

Brent futures extended gains as supply concerns escalated in the oil-rich Middle East.

The US Department of Defense ordered the deployment of additional naval forces to the Middle East, amid escalating tensions between Israel and Iran following the killings of senior Hamas and Hezbollah leaders.

“[Brent] crude oil rallied sharply as fears of an Iranian response to recent attacks escalate,” ANZ Bank’s senior commodity strategist Daniel Hynes said.

This move by the US follows threats of retaliation from Iran and its regional proxies after the assassinations of Hamas leader Ismail Haniyeh and Hezbollah commander Fuad Shukr in July.

“Oil prices are rising on geopolitical risk,” Price Futures Group’s senior market analyst Phil Flynn remarked.

Downward pressure:

The Organization of the Petroleum Exporting Countries (OPEC) has cut its world oil demand growth forecast to 2.1 million b/d, with total consumption reaching 104.3 million b/d in 2024, about 135,000 b/d lower than its previous month's assessment.

This news has exerted some downward pressure on Brent’s price today.

The slight downward revision in global oil demand is due to an apparent decline in demand growth in the world’s second largest consumer – China, the oil-producers body said in its monthly oil market report (MOMR).

Oil investors are now waiting for fresh cues from the US Consumer Price Index (CPI) data, an indicator of inflation growth in the country. Notably, the US Federal Reserve (Fed) is expected to make a cut in its key interest rate in September if inflation level comes down.

“[Oil] prices have been under pressure amid concerns over demand in both China and developed markets such as the US,” Hynes said.

By Aparupa Mazumder

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