Oil prices climbed on Monday, with Brent crude nearing the $80 mark, driven by escalating concerns over potential disruptions in the Middle East.
The rise follows last week’s significant gains, marking the sharpest increase since early 2023. Fears of a broader conflict in the region, a key oil-producing hub, have sparked worries about the impact on global oil supplies.
Brent crude futures rose by $1.09, or 1.4 per cent, to reach $79.14 per barrel by 1316 GMT, while U.S. West Texas Intermediate (WTI) crude futures increased by $1.15, or 1.55 per cent, to $75.53 per barrel. Both benchmarks surged last week, with Brent jumping over 8 per cent and WTI up by 9.1 per cent, amid rising tensions between Israel and Iran.
The oil market remains on edge as concerns grow that Israel could target Iranian oil facilities, following an Iranian missile attack on October 1. Tensions heightened further on Monday, with Iran-backed Hezbollah launching rockets into Haifa, Israel’s third-largest city.
Meanwhile, Israel signaled its readiness to expand ground operations in southern Lebanon, coinciding with the first anniversary of the Gaza war, stoking fears of a broader regional conflict that could involve the United States and Iran.
This geopolitical volatility has sparked concerns over potential disruptions to oil exports from the Middle East. While the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, collectively known as OPEC+, are expected to increase production in December following earlier cuts, analysts caution that the group may face challenges if Iranian oil supply is disrupted. If Iran retaliates by targeting oil infrastructure in neighboring Gulf nations, it could significantly impact global supplies.
Oil prices have fluctuated considerably in recent months. Last month, Brent crude futures dipped below $70 per barrel for the first time since December 2021, driven by supply-demand imbalances and speculative selling. However, geopolitical tensions and disruptions such as Tropical Storm Francine in the U.S. have lent support to prices in recent weeks.
The surge in oil prices, now nearing $80 per barrel, could strengthen Nigeria’s fiscal position, as the price exceeds the benchmark oil price in the 2024 budget. This could offer some relief to the naira, which has seen significant depreciation, trading around N1540 to the U.S. dollar in official markets and weaker in parallel markets.
As the situation in the Middle East unfolds, investors are closely watching the impact on oil supplies and global markets, with the possibility of further price spikes if tensions escalate.
