Oil Prices Rise Amid Middle East Tensions

Oil prices saw a significant increase in Asian trading on Thursday, driven by Israel's aggressive stance towards Iran. Market attention is also on upcoming business activity data from major economies.

After enduring two weeks of sharp losses due to fears of declining demand, crude prices showed signs of recovery this week, although overall gains remained modest.

Prices fell on Wednesday following U.S. data indicating a larger-than-expected increase in crude stockpiles. As of 21:24 ET (01:24 GMT), Brent crude futures for December increased by 1% to $75.72 a barrel, while West Texas Intermediate crude for the same period rose 1.1% to $71.57 a barrel.

Israeli Defense Minister Advocates for Iran Strike

Traders are bracing for potential heightened tensions in the Middle East, especially after Israeli Defense Minister Yoav Gallant informed air force crews that the world would recognize Israel's strength following a strike against Iran.

This commentary comes in light of growing expectations for a retaliatory strike against Iran, following an October 1 assault, marking Iran’s second significant attack on Israel in six months.

Rising fears of escalating conflict have been a primary influence on oil prices, with traders adding a risk premium to crude due to concerns over possible strikes against Iran's oil and nuclear facilities. The situation has escalated further with Israel intensifying its offensive against Hamas and Hezbollah.

Despite U.S. efforts to establish peace in the region ahead of the November 5 presidential election, the likelihood of a ceasefire seems low.

U.S. and EU PMIs in Focus

Traders are also closely monitoring essential purchasing managers index (PMI) data from the Eurozone and the U.S. to gain insights into the world's largest economies.

While Eurozone activity is anticipated to remain in contraction, the U.S. sector is expected to show resilience, primarily due to the services sector's strength.

Significant indicators of resilience in the U.S. economy could lead to speculations regarding a slower pace of interest rate cuts by the Federal Reserve, which has negatively affected oil markets recently. Enhanced performance in major global economies may also signal a more optimistic outlook for crude demand, although sluggish growth in China, the top oil importer, may temper this trend.