Oil prices experienced an upward trend on Monday, driven by escalating tensions in the Middle East, promising prospects for Chinese demand, and a strengthening euro against the dollar following the first round of legislative elections in France.
Brent and WTI Crude Oil Futures Rise
Around 10:15 GMT, the price of Brent crude oil for September delivery, marking its first day as the reference contract, increased by 0.28% to $85.24 per barrel. Similarly, its American counterpart, West Texas Intermediate (WTI) crude oil for August delivery, saw a 0.25% rise to $81.74 per barrel.
Analysts attribute the oil price surge to “escalating tensions between Israel and Hezbollah, coupled with a robust Chinese manufacturing PMI index,” as summarized by DNB analysts.
Geopolitical Tensions Fuel Concerns
Nearly nine months after the onset of the war, triggered by an unprecedented Hamas attack on Israel on October 7, Israel launched strikes on southern Gaza on Monday in response to 20 rockets fired by Palestinian militants.
This conflict has also raised fears of a potential clash between Israel and Lebanese Hezbollah, following a surge in cross-border attacks.
Positive Economic Indicators from China
Meanwhile, China, the world’s largest oil importer, witnessed its strongest manufacturing activity growth in three years in June, according to an independent index released on Monday.
Additionally, Hurricane Beryl, a Category 4 storm described as “extremely dangerous” by forecasters, is expected to cause significant damage in the Caribbean. While it is not anticipated to disrupt oil and gas operations in the Gulf of Mexico, it serves as a reminder of the active hurricane season predicted by forecasters, according to DNB.
Euro Rebound and French Election Results
Furthermore, markets are experiencing a “small sigh of relief” following the results of the first round of legislative elections in France, leading to a boost in the euro and a corresponding decline in the dollar. This phenomenon is likely to fuel oil purchases, as noted by John Evans, an analyst at PVM Energy.
A weaker dollar reduces the cost of oil, which is traded in the U.S. currency, thereby tending to drive up oil prices.
Market Reactions to French Election Results
Market sentiment suggests that the results of the first round of legislative elections in France have reduced the likelihood of the National Rally securing an absolute majority in the National Assembly, which is viewed as the “least worst scenario,” according to John Plassard, a specialist at Mirabaud.
The National Rally emerged as the leading party with over 33% of the vote, slightly below recent polls. The New Popular Front achieved nearly 28%, while the presidential camp secured 20%.