Oil prices climbed to their highest level in over two months on Monday, driven by escalating tensions in the Middle East, the onset of the hurricane season, and expectations of increased fuel demand ahead of the holiday travel season.
Brent and WTI Crude Oil Prices Rise
The price of Brent crude oil from the North Sea, for September delivery, which is its first day of use as a reference contract, increased by 1.88% to $86.60.
Similarly, its American equivalent, the West Texas Intermediate (WTI) crude oil, for August delivery, rose by 2.25% to $83.38.
Escalating Tensions in the Middle East
Analysts from DNB summarized the situation, stating that oil is “driven by the escalation of tensions between Israel and Hezbollah and by a solid Chinese manufacturing PMI index.”
Nearly nine months after the war began, triggered by an unprecedented attack by Hamas on Israel on October 7th, Israel struck southern Gaza on Monday following the firing of 20 rockets into its territory by Palestinian fighters.
This war has also raised fears of a conflict between Israel and Lebanese Hezbollah after an increase in attacks on both sides of the Israeli-Lebanese border.
Robert Yawger of Mizuho USA expressed concern about the potential for an expanded conflict, stating that it “is not necessarily what will happen, but it gets a little closer every day.”
Early and Intense Hurricane Season
Another factor contributing to the rise in prices is the early and intense hurricane season in the United States and the Caribbean. This always raises concerns about the potential impact on production and refining facilities in the Gulf of Mexico, which have not been affected so far.
Hurricane Beryl made landfall on the island of Grenada in the Antilles on Monday, with “devastating” winds of up to 240 km/h, according to the U.S. National Hurricane Center (NHC).
Robert Yawger noted that this is the first time a Category 4 hurricane has occurred so early in the season.
“This monster storm at the end of June paints a worrying picture for the rest of the season,” added the analyst, prompting investors to bet on a rise in crude oil prices.
Increased Gasoline Demand Ahead of Holidays
Finally, the rise in crude oil prices was also driven by the increase in gasoline prices ahead of a week of holiday travel in the United States. Markets will be closed on Thursday, July 4th, for Independence Day.