Oil settles amid Israeli bombardment in southern Lebanon

The fate of Hezbollah leader Ali Karaki, the head of the southern front, remains unknown after being targeted by an Israeli strike on Monday evening in the southern suburbs of the Lebanese capital. At least 274 people, including 39 women and 21 children, they were killed and 1,024 injured in Israeli attacks on Lebanon, the country’s Ministry of Health revealed, as reported by Al Jazeera.

Oil prices were traded in Monday’s session despite the renewed threat of this escalating into a regional war. Brent crude for November delivery fell 1.8% to trade at $73.22 a barrel at 12.45pm ET, while WTI crude for October delivery fell 1.9% to trade hands at $69.68 per barrel.

Egyptian Foreign Minister Badr Abdelatty warned on Sunday of the risk of an all-out regional war as fighting between Israel and Lebanon’s Hezbollah terror group intensifies. The latest escalation has had a negative impact on talks for a hostage ceasefire between Israel and Hamas in Gaza. For months, the United States, Egypt and Qatar have been trying to reach an agreement for a ceasefire and the release of hostages in Gaza, without success.

“There is great concern about…the possibility of an escalation in the region leading to an all-out regional war“, Abdelatty told AFP at UN headquarters, adding that the latest increase in violence had “negatively impacted” the ceasefire negotiations.

The latest drop in oil prices could reverse recent gains. Last week, oil prices rose by their biggest margin in six weeks, in a week marked by the Federal Reserve’s decision to cut interest rates and renewed tensions in the Middle East.

“The weaker monetary policy outlook has boosted expectations of stronger future demand, supporting a more likely bullish outlook for crude oil prices going forward,SEB commodity analyst Ole Hvalbye said in a note.

According to RBC Capital’s head of global commodities strategy, Helima Croft, Iran remains wild card for the oil marketswhich currently shows so far no desire to lift the conflict beyond the ongoing “grey zone” as the country benefits from lax enforcement of energy sanctions and increased oil sales.

Markets are likely to be jittery from Washington’s announcement on Monday afternoon that it will deploy additional troops to the Middle East as tensions flare. The Associated Press quoted the Pentagon as saying on Monday that more troops would be sent in because of this latest escalation. No figures were shared, although 40,000 US troops are currently in the region.

By Charles Kennedy for Oilprice.com

More top reads from Oilprice.com