Oil prices rose more than 3% on Monday after a series of events involving the US and Iran, including a reported strike by the US against Iranian radar and drone control sites.
The fighting has dimmed hopes for an extension to the ceasefire between the US and Iran, which had previously driven oil prices down. The US said it conducted self-defence strikes in response to what it described as 'aggressive' actions by Tehran.
Meanwhile, Israel's involvement in the conflict has been a key factor in negotiations over a potential deal to extend the ceasefire. The US has proposed a plan under which Hezbollah would stop attacks on Israel in exchange for Israel refraining from escalation in Beirut.
The Strait of Hormuz, a critical oil and gas shipping lane, is also at risk due to concerns over mines being laid by Iran. This could slow the reopening of the waterway and impact global oil supplies.
Goldman Sachs has warned that weak oil demand in China and Europe poses a major downside risk to its fourth-quarter forecast, while Middle East supply disruptions could still push prices higher.
The recent developments have added to concerns about the stability of the oil market, with investors seeking safe-haven assets in response to the increased uncertainty.
An analysis by IG analyst Tony Sycamore noted that even if an agreement is reached, it may not deliver a significant increase in supply due to existing mine-laying activities by Iran.
The situation highlights the complex web of factors influencing oil prices, including geopolitical tensions and economic data from major economies.
As the world's second-largest economy, China's slowing factory activity has added to concerns about the global recovery, with implications for oil demand and prices.
Overall, the recent surge in oil prices reflects the growing uncertainty in the Middle East and the potential impact on global energy supplies.
The recent escalation of tensions between the US and Iran has led to increased uncertainty in the oil market, with prices rising as investors seek safe-haven assets.
