Oil prices spiked early Wednesday following reports that Israel killed Hamas political leader Ismail Haniyeh in a missile strike in Tehran. This incident has intensified tensions in the Middle East, a key region for global crude oil production.
West Texas Intermediate (WTI) crude climbed above $76 per barrel, while Brent crude also saw gains. The strike, reportedly confirmed by Hamas, comes shortly after an Israeli airstrike in Beirut that resulted in the death of a senior Hezbollah commander.
The recent surge in violence, including a Hezbollah attack in the Israeli-controlled Golan Heights that killed 12 youths, threatens to derail ongoing cease-fire talks between Israel and Hamas.
In response to the escalating situation, traders have shown signs of hedging against further conflict, with Brent call option volumes reaching their highest levels since early June. Market volatility has also spiked to its highest since the beginning of the summer, reflecting increased uncertainty.
Analysts Ewa Manthey and Warren Patterson from ING highlighted that the market is factoring in a higher risk premium for oil as new details emerge from Iran.
Despite these developments, crude oil prices have not seen dramatic increases since the conflict began in early October 2023. Brent crude is still on track for a nearly 7% drop in July.
In other news, the American Petroleum Institute reported a 4.5 million barrel decrease in U.S. crude inventories last week. If this decline is confirmed by official data, it would mark the longest streak of inventory reductions since January 2022. Additionally, market participants are keeping an eye on an OPEC+ committee meeting scheduled for Thursday and a Federal Reserve interest rate meeting, where rates are expected to remain unchanged.
Credit: Businessday NG (Text Excluding Headline)
