Crude oil prices gained 2% earlier today after a missile strike on a hospital in Gaza killed about 500 people.
Israel’s army and Hamas blamed each other for the attack. Oil market watchers, meanwhile, began worrying about an increased possibility of oil supply disruption from the region as the prospect of a diplomatic solution became rather remote.
The latest indication for this was the cancelation of a summit between U.S. President Joe Biden and the presidents of Egypt and Palestine, to be held in Jordan. Jordan canceled the summit on Tuesday, Reuters reported. Jordanian King Abdullah has blamed the tragedy at the Gaza hospital on Israel.
With Saudi Arabia also taking a pro-Palestine stance in its recent conversations with the U.S., the possibility for a quick end of the fighting is fading away while the possibility of greater regional involvement appears to be rising if oil prices are any indication.
“A long occupation looms as the scenario that pushes Brent oil futures above $US100/bbl because it raises the risk that the Israel-Hamas conflict expands and potentially draws in Iran directly,” Commonwealth Bank of Australia analyst Vivek Dhar told Reuters.
“Clearly a widening of the conflict would bring more supply risks to a market which is already very tight,” Warren Patterson, head of commodities strategy for Dutch ING, told Bloomberg. “The most immediate supply risk likely remains around Iranian barrels.”
Bloomberg recalled Iran had earlier this week warned that the escalation of the conflict regionally was getting “inevitable”.
Meanwhile, the latest GDP data from China provided additional support for prices. The country’s economy grew faster than expected in the third quarter, booking a 4.9% annual increase and a 1.3% quarterly growth rate.
Later today, oil watchers’ attention will be focused on the EIA weekly oil inventory report after the American Petroleum Institute estimated a solid 4-million-barrel draw when analysts had expected a much more modest one of about half a million barrels.