Oil jumped in trading early Wednesday after Hamas, the Palestinian group said Israel killed its political leader, in a missile attack in Teheran, stoking tensions in a region that produces around a third of the world’s crude.
West Texas Intermediate climbed back above $76 a barrel, while Brent also advanced. Hamas said that Ismail Haniyeh was killed in an airstrike in Iran. It followed an earlier attack by Israel on Beirut that killed a senior Hezbollah commander.
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There’s been an escalation in the conflict since last weekend, when a Hezbollah strike in the Israel-controlled Golan Heights killed 12 youngsters, potentially jeopardizing the ongoing cease-fire talksbetween Israel and Hamas.
In a sign that oil traders are hedging against further conflict, Brent call volumes were the highest since early June on Tuesday. A gauge of market volatility is also the highest since the start of the summer.
“The details are still emerging from Iran with the market allocating a higher risk premium for oil,” ING analysts Ewa Manthey and Warren Patterson wrote.
The market has been assessing the risk that fresh escalation could affect production and exports, particularly from Iran. Crude prices haven’t reacted particularly sharply to recent developments in the war, which has been going since early October 2023.
Futures are still headed for a monthly drop in July, with Brent down almost 7%.
Away from the Middle East, the American Petroleum Institute said crude inventories fell by 4.5 million barrels last week. If confirmed by official figures later on Wednesday, it would mark the longest streak of declines since January 2022.
Traders are also monitoring an OPEC+ committee meeting that will take place on Thursday, as well as a Federal Reserve interest rate meeting later Wednesday, with rates expected to remain unchanged.
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