Oil prices jump over 1% as geopolitical tensions simmer in Middle East

April 23, 2024 (MLN): Oil prices rebounded and surged over 1% on Tuesday as market participants continued to weigh on geopolitical concerns in the Middle East.

Brent crude traded near $87.06 per barrel, up by 1.01% on the day.

While West Texas Intermediate crude (WTI) was at $82.62 per barrel, up by 0.91% on the day.

Both benchmarks fell 29 cents in the previous session on signs that a recent escalation of tensions between Israel and Iran had little near-term impact on oil supplies from the region, as Reuters reported.

"The unwinding of geo-political risk premium has dented crude oil prices recently as supply was not disrupted meaningfully," said Sugandha Sachdeva, founder of Delhi-based research firm SS WealthStreet.

But the evolving geopolitical landscape remains critical in steering crude oil prices, she said.

"While there are no indications of an imminent full-scale war between the countries involved, any escalation in tensions could quickly reverse the current trend," Sachdeva added.

ANZ analysts echoed the sentiment and highlighted U.S. approval of new sanctions on Iran's oil sector that broaden current sanctions to include foreign ports, vessels and refineries that knowingly process or ship Iranian crude.

Also, EU foreign ministers agreed in principle on Monday to expand sanctions on Iran after Tehran's missile and drone attack on Israel, the bloc's foreign policy chief Josep Borrell said.

"The geopolitical backdrop is still very fraught with so many risks at the moment, so clearly we're going to see a lot of volatility until there's a lot more clarity around it," the ANZ analysts said in a podcast.

Israeli troops fought their way back into an eastern section of Khan Younis in a surprise raid, residents said on Monday, sending people who had returned to abandoned homes in the ruins of the southern Gaza Strip's main city fleeing once more.

Investors are waiting for the release of the U.S. gross domestic product figures and the March personal consumption expenditure data - the Fed's preferred inflation gauge - later this week to assess the trajectory of monetary policy.

"Sticky U.S. inflation figures, hawkish statements from key Fed officials, and rising U.S. inventories are all acting as constraints on crude oil price growth," Sachdeva said.

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