Oil Prices Recovery
Oil prices increased in early Asian trading on Tuesday, rebounding from substantial losses triggered by heightened concerns over escalating Middle Eastern conflict.
Brent crude futures for December delivery rose 0.7% to $71.94 a barrel, while West Texas Intermediate (WTI) crude futures increased 0.7% to $67.87 a barrel as of 20:17 ET (00:17 GMT).
Both contracts experienced a decline of over 6% on Monday following an Israeli strike against Iran that largely avoided targeting Tehran’s oil and nuclear facilities. This strike alleviated fears of a significant escalation in the Middle East, which had led traders to price in a risk premium on oil.
Ongoing Tensions in the Middle East
Concerns over supply disruptions due to ongoing conflicts in the Middle East have significantly influenced oil prices, especially after Iran attacked Israel in early October. Israel retaliated with the recent weekend strike. While Tehran downplayed the impact of the Israeli strike, it continues to threaten retaliation, maintaining an air of uncertainty in the region.
Moreover, Israel seems committed to its offensive against Hamas and Hezbollah, which limits the potential for a ceasefire.
U.S. Elections and Economic Data Influence
Market sentiment surrounding oil is also cautious ahead of the upcoming U.S. presidential elections in less than a week. With the dollar strengthening, traders are wary of a close race between Donald Trump and Kamala Harris, as a Trump victory may lead to inflationary policies.
Additionally, a change in administration could shift U.S. foreign policy regarding the Middle East. This week, traders will also focus on various economic reports, including the Purchasing Managers Index (PMI) data from China on Thursday, followed by U.S. GDP data for Q3 and the PCE price index and nonfarm payrolls on Friday.
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