Oil Prices Forecast: Israel-Hamas Conflict Fuels Uncertainty in Crude Market

Highlights

• Israel-Hamas tensions escalate oil prices.
• U.S. mulls tougher sanctions on Iran and Russia.
• Short-term forecast remains bullish on supply concerns.

Tensions Elevate Oil Prices to New Heights

Oil prices inched higher this Monday, extending last week’s gains as the Israel-Hamas conflict adds a layer of uncertainty to an already tense market. Brent futures nudged up to $90.90 per barrel, while U.S. West Texas Intermediate (WTI) rose to $87.71 a barrel. Both benchmarks soared nearly 6% on Friday, reflecting heightened concerns over a broader Middle East conflict.

Investor Uncertainty Amid Israel-Hamas Conflict

Despite a large-scale ground assault by Israel not yet unfolding, investors remain wary. The uncertainty surrounding the conflict’s impact on oil-producing countries has been partially priced in, but an escalation could send prices soaring past the $100 mark. While Israel itself isn’t a major oil producer, the geopolitical risk surrounding the Israel-Hamas conflict is the most significant since Russia’s invasion of Ukraine last year.

Global Supply Concerns

Market players are closely monitoring what a potential escalation could mean for supplies from top oil-producing regions like Saudi Arabia, Iran, and the United Arab Emirates. If Iran is implicated in supporting the Hamas attacks, the U.S. could fully enforce existing sanctions on Iranian oil exports, putting at risk the 0.5-1 million barrels per day increase in Iran’s oil exports this year.

US Diplomacy and Sanctions

U.S. Secretary of State Antony Blinken will return to Israel for further diplomatic efforts, while the U.S. recently imposed the first sanctions on tanker owners carrying Russian oil above the G7’s price cap of $60 a barrel. The move could curtail supply from one of the world’s top crude exporters, adding another layer of complexity to the market.

Short-Term Forecast: Bullish

In the week ahead, the oil market is likely to remain on edge as investors gauge the ramifications of the Israel-Hamas conflict and its potential spill-over into larger geopolitical issues. The overall sentiment leans bullish, bolstered by supply concerns and escalating tensions in the Middle East.

Technical Analysis

The current daily price of 87.71 sits above both the 200-day and 50-day moving averages, at 77.76 and 85.42 respectively, signaling bullish momentum. It is also closely hugging its previous close of 87.69, suggesting market equilibrium.

The market seems well-positioned between its minor support at 82.68 and minor resistance at 92.49. The main support and resistance levels are at 77.43 and 97.67, offering a broad trading range.

Considering these technical indicators, the current market sentiment leans bullish. However, caution is advised as the market moves closer to the resistance levels.