Oil prices surge sharply as fears over Middle East supplies drive gains

Oil prices are rising sharply today, at one point gaining more than three percent and reaching their highest level in two weeks. Among other factors, gains are being driven by fears over supplies from the Middle East amid the possibility of further escalation in the conflict between Israel and Palestine. Iran has called for an oil embargo on Israel.

Shortly before 14:00 CEST, the price of North Sea Brent crude was up 2.6 percent at just above 92.20 dollars per barrel. US light crude WTI was up 2.8 percent at the same time, trading above 89 dollars per barrel.

Markets are pricing in a risk premium after hundreds of Palestinians were killed in an explosion at a hospital in Gaza City on Tuesday. Israeli and Palestinian officials have blamed each other for the attack.

Jordan subsequently cancelled a summit where US President Joe Biden was due to meet Egyptian and Palestinian officials. Biden arrived in Israel today, where he pledged solidarity in the war against the radical Hamas movement.

Iranian Foreign Minister Hossein Amir-Abdollahian called on members of the Organization of Islamic Cooperation to impose an oil embargo on Israel.

„A prolonged occupation is emerging as a scenario that is pushing Brent oil futures above USD 100 per barrel, as it increases the risk that the conflict between Israel and Hamas will spread and potentially draw Iran directly into it,“ Reuters quoted Vivek Dhar, an analyst at Commonwealth Bank of Australia, as saying.

Other factors are also supporting oil prices, in addition to geopolitical tensions.

According to market sources citing data from the American Petroleum Institute (API) on Tuesday, US crude oil inventories fell much more than expected in the week to 13 October. They dropped by 4.4 million barrels, while the forecast had been for a decrease of 300,000 barrels.

Oil prices in dollars per barrel (about 159 litres):