Oil prices traded mixed on Monday amid the increasing risk of a broader conflict between Israel and the Lebanese militant group Hezbollah following the rocket strike on Golan Heights over the weekend.
Brent crude oil futures expiring in September climbed 0.37% to $81.43 per barrel, while the US West Texas Intermediate (WTI) crude futures fell 0.06% to $77.11 per barrel but later rose 0.29% to $77.38.
Gains in the crude were also curbed as markets tried to recover from sharp declines driven by lackluster demand views and oversupply expectations for the coming months. The limited gains also came amid a muted demand outlook retaining supply disruption potential.
Uncertainty in China’s recovery kept pressure on oil after economic concerns over the leading importer led prices significantly down in the last three weeks.
Markets also exercised caution ahead of the Federal Reserve’s meeting on Wednesday. The central bank is widely expected to leave interest rates unchanged at 5.25%- 5.50%.
Golan Heights Attack Raises Risk of Middle East Disruptions
Traders priced in some risk premium to oil prices after it was reported that Israel and the US held Hezbollah responsible for the missile attack on a football ground in the village of Majdal Shams in the Israeli-controlled Golan Heights on Saturday, in the latest escalation of tensions in the Middle East.
The incident has resulted in the deaths of 12 children and teenagers, but the Iran-backed militia has vehemently denied facilitating the fatal strike, which involved about 30 projectiles reportedly fired from Lebanon into the town.
Israel responded to the attack overnight on Sunday, launching retaliatory airstrikes against the group’s seven targets, including weapons caches and terrorist infrastructure “deep inside Lebanese territory,” according to the Israel Defense Forces (IDF).
It has yet to be known whether the incident led to casualties.
The latest development further reinforced the possibility of a broader fight between Israel and Hezbollah, which might disrupt supplies in the oil-rich region of the Middle East.
Growing geopolitical tensions have also significantly weakened the potential of Israel and the Palestinian militant group Hamas to establish a ceasefire deal.
