Oil futures remained relatively unchanged on Monday following an initial surge in Asian trading hours. The surge came in response to a drone attack that killed three U.S. troops in Jordan, sparking concerns of a wider conflict in the Middle East that could impact crude supplies.
- West Texas Intermediate crude for March delivery rose 9 cents, or 0.1%, to $78.10 a barrel on the New York Mercantile Exchange.
- March Brent crude, the global benchmark, was up 11 cents, or 0.1%, at $83.66 a barrel on ICE Futures Europe.
Both WTI and Brent crude experienced significant price increases of over $1 a barrel as traders reacted to the drone attack. The attack was attributed to an Iran-backed militia, leading President Joe Biden to promise retaliation.
According to Phil Flynn, an analyst at Price Futures Group, the deaths of U.S. troops suggest that the ongoing Israel-Hamas conflict may pose risks to global oil supplies. Despite the initial surge in prices subsiding, Flynn suggests that the fundamental outlook remains dangerously bullish.
Last week, oil futures rallied to their highest point since November due in part to production outages in the U.S. and improved expectations for economic growth.
Concerns over potential miscalculations in the Middle East are also growing, as rational actors may unintentionally become involved in an escalation of conflicts. Stephen Innes, Managing Director at SPI Asset Management, notes the complexity of Middle East conflicts and predicts continued instability with potential global repercussions. Higher oil prices are a primary concern, particularly if a severe supply disruption scenario occurs, such as an increase in maritime traffic congestion in the Strait of Hormuz leading to a significant rise in prices.