Oil posted its largest weekly gain in a month after Iran said a new front in the conflict between Israel and Hamas was possible. Traders also covered bearish bets ahead of a widely expected invasion of Gaza.
(Bloomberg) — Oil posted its largest weekly gain in a month after Iran said a new front in the conflict between Israel and Hamas was possible. Traders also covered bearish bets ahead of a widely expected invasion of Gaza.
West Texas Intermediate climbed above $87 a barrel, cementing a $5 weekly gain after the onset of the Israel-Hamas war. On Monday, prices surged after news of Hamas’s surprise attack on Israel, but futures pared those gains in the next few sessions as traders saw no immediate risks to Middle Eastern crude supplies.
Then on Friday, prices surged again as Iran’s foreign minister warned that Tehran-backed militants could open a new front in Israel’s war against Hamas if the blockade of Gaza continued. A ground assault by the Israeli military is expected soon after it urged an evacuation of the northern part of Gaza.
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Options markets, which have seen giant swings over the last week, saw another move in favor of bullish calls, an unusual flip that shows traders are hedging against the risk of further price spikes.
Traders are trying to price in the potential for the war to draw in Iran, a supplier of arms and money to Hamas, and any risk of a disruption of wider flows. While supply hasn’t been meaningfully affected so far, traders said Friday’s rally indicated investors are removing bearish bets before the weekend.
“Crude prices are rallying as an already tight oil market now has to deal with more geopolitical instability,” said Ed Moya, senior markets analyst at Oanda. “It seems energy traders are convinced that we will see some conflict-related supply disruptions in the near future.”
On Thursday, the US took its first steps in enforcing sanctions that it placed on Russian oil flows. Two vessels were sanctioned for breaking the price cap on Russian crude, a move that has spooked tanker markets.
Terminal users can click here for more on the Israel-Hamas War.
–With assistance from Mia Gindis.
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