Oil News: Crude Prices Surge as Middle East Tensions Drive Bullish Outlook

Crude Oil Prices Surge on Middle East Tensions

Light crude oil futures surged higher on Monday, extending a breakout above the critical 200-day moving average at $73.22, now considered a significant support level. Upside momentum pushed prices past $76.37, reaffirming a bullish trend and placing key resistance levels at $77.76 and $80.71 in focus for traders. This marks continued gains for crude oil, driven by fears of escalating geopolitical tensions in the Middle East.

At 12:05 GMT, Light crude oil futures are trading $75.97, up $1.59 or +2.14%.

Rising Geopolitical Risks Boost Oil Prices

Oil prices, including international benchmark Brent and U.S. West Texas Intermediate (WTI), soared last week on concerns about a broader conflict in the Middle East. Brent rose more than 8%, and WTI jumped by 9.1%, both posting their steepest weekly gains since early 2023. The heightened tension stems from the potential for Israel to strike Iranian oil facilities in response to Iran’s October 1 missile attack on Israel, sparking fears of disruption in oil exports from one of the world’s most critical energy-producing regions.

These geopolitical fears overshadow concerns about weak global demand. Rocket attacks by Iran-backed Hezbollah on Israel’s northern city of Haifa, coupled with Israel’s potential military incursions into southern Lebanon, have intensified fears of a wider war. Analysts warn that such a conflict could draw in the United States and Iran, further disrupting oil supplies.

Supply Disruptions and OPEC+ Response

While the risk of direct damage to Iranian oil facilities is seen as minimal, according to ANZ Research, broader supply disruptions remain possible. OPEC+, the coalition of the Organization of the Petroleum Exporting Countries and its allies, has about 7 million barrels per day of spare capacity to mitigate potential shortfalls.

However, the group’s ability to stabilize prices could be tested if Iran retaliates by targeting oil installations in neighboring Gulf states. OPEC+ has maintained production cuts to support prices in recent years, and it plans to raise output starting in December, though its capacity to compensate for major supply shocks may be limited.

Macroeconomic Factors Dampen Demand Outlook

Despite the geopolitical risks, market analysts remain cautious about the long-term demand outlook. John Evans, of oil brokerage PVM, emphasized that while the Middle East conflict has raised concern within the oil industry, broader macroeconomic conditions continue to weigh on global demand growth. Brent prices, currently around $10 lower than the levels seen when the conflict began a year ago, reflect these macroeconomic headwinds.

Market Forecast: Bullish in the Short Term

In the near term, crude oil prices are expected to remain bullish as geopolitical risks keep supply disruptions in focus. Light crude oil futures could test the $80 mark, with traders eyeing resistance levels near $77.76 and $80.71. However, the long-term outlook remains clouded by demand concerns, which could cap further price gains unless the conflict in the Middle East significantly escalates. Traders should monitor developments closely, particularly around potential retaliatory actions that could impact Gulf oil installations.