Oil Prices Drop Amid Eased Middle East Tensions

Oil prices fell sharply in early Asian trade on Monday, as fears of a Middle East war eased following an Israeli strike against Iran over the weekend, which was less severe than anticipated.

The attack led traders to price out a risk premium from crude prices, shifting the focus back to demand, which is expected to weaken in the coming months.

Brent Oil Futures expiring in December fell 4.1% to $72.97 a barrel, while West Texas Intermediate crude futures dipped 4.2% to $68.76 a barrel by 19:57 ET (23:57 GMT). Both contracts neared their weakest levels since early October.

Israeli Strike Against Iran Avoids Oil, Nuclear Sites

Israel launched a strike against several Iranian military sites on Saturday but avoided hitting the country's major oil production and nuclear facilities.

Iran downplayed the attack's impact but threatened retaliation.

The Israeli attack alleviated concerns over a potential major escalation in the long-standing Middle Eastern conflict. Traders had been worried that any strikes on Iran’s oil and nuclear infrastructure could severely disrupt oil supplies from the region.

This worry had previously buoyed crude prices in the past month, particularly after Iran's attack on Israel at the beginning of October.

Despite Israel's restraint, the broader Middle Eastern conflict still showed little sign of de-escalation, as it continued its offensive against Hamas and Hezbollah.

Key Economic Readings This Week

Beyond the Middle East situation, attention this week is on a barrage of key economic data for insights into global oil demand.

Gross Domestic Product data from the U.S. and the Eurozone is upcoming, along with the PCE price index data, which is the Federal Reserve’s preferred inflation measure. Additionally, Purchasing Managers Index data from China, the world’s largest oil importer, will be released later in the week, granting more insights after the country announced several major stimulus measures recently.