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The oil price has jumped more than 3% this morning as financial markets are rattled by the Israel-Hamas war: Brent crude has jumped back to $89 a barrel this morning, recovering a chunk of last week’s losses, on fears that the surprise Hamas attack on Israel could escalate further, lifting tensions across the Middle East and hitting output from leading oil producers.
The risk of sanctions and oil supply shocks in the Middle East has driven up both gold and crude prices, reports Kyle Rodda, a senior financial market analyst at Capital.com.
Rodda adds: "The human impacts are far more consequential than anything happening in the markets, especially regarding the growing civilian casualties that have already occurred and are likely to increase as tensions escalate.
"For those with open positions in the market, there could be ongoing volatility as the situation unfolds. Crude prices could be one barometer of the situation as instability in the region increases, impacting trilateral talks between Israel, the US, and Saudi Arabia and relations between the west and Iran."
Hedge fund manager Pierre Andurand argues that the oil market could tighten over time, but there is little immediate threat to supplies.
Writing in X (formerly Twitter), Andurand said: "Many people asked me if the Hamas attacks on Israel will have an impact on oil prices. As the Levant is not a large oil producing region, it is unlikely to impact oil supply in the short term. And therefore one should not expect a large oil price spike in the coming days. But it could eventually have an impact on supply and prices.
"Global oil inventories are low, and the Saudi and Russian production cuts will lead to more inventories draws over the next few months. The market will eventually have to beg for more Saudi supply, which I believe, will not happen sub-$110 Brent."
The US dollar has also strengthened, as risk sentiment weakens and investors rush into safe havens.
Wall Street is set to open lower, with the Dow Jones industrial average set to fall about 0.7%.
Israel’s shekel fell to a near eight-year low in early trading, prompting the country’s central bank to step in to support the currency.
The Bank of Israel said it will sell up to $30bn of foreign currency in the open market to maintain stability.
According to Reuters, this is the central bank’s first ever sale of foreign exchange.
The Bank of Israel says: "The Bank will operate in the market during the coming period in order to moderate volatility in the shekel exchange rate and to provide the necessary liquidity for the continued proper functioning of the markets.
"In addition to the $30bn programme, and as necessary, the Bank will provide liquidity to the market through SWAP mechanisms in the market of up to $15bn."
The move appeared to quickly calm the market, with the shekel recovering some of its early losses.
It is now trading at 3.89 to the dollar, up from 3.8388 on Friday night, having hit 3.921 earlier today, the weakest since early 2016.
The agenda
• 10.45am BST: Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel awarded
• 11am BST: Ireland’s industrial production for August
• 1pm BST: Mexico’s inflation rate for September
We’ll be tracking all the main events throughout the day ... |
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