Oil advanced, heading for a second straight weekly gain, as geopolitical tensions ratcheted higher in the Middle East.
(Bloomberg) — Oil advanced, heading for a second straight weekly gain, as geopolitical tensions ratcheted higher in the Middle East.
Amid a flurry of military activity, traders are trying to price in the potential for the war to draw in Iran, a supplier of arms and money to Hezbollah. Israel’s military said it struck Hamas targets in Gaza overnight and responded to fire from Lebanon by hitting Hezbollah assets. The US is seeing stepped-up drone attacks in Iraq and Syria, and an American destroyer intercepted cruise missiles fired toward Israel by Houthi rebels in Yemen.
While oil flows have so far been largely unaffected, Israel’s expected ground invasion of Gaza is adding to tensions and putting the market on alert for potential disruptions in a region that accounts for about a third of global supply.
“Underlying fundamentals are playing second fiddle to the tragic events in Israel and Gaza,” said Tamas Varga, an analyst at brokerage PVM Oil Associates Ltd.
The war has also led to a frenzy of activity in the options market as traders position around the risk of further surges in crude. Trading of bullish calls has outpaced that of bearish puts every day for almost a month.
Still, even a spread in the conflict might not lead to sustained higher prices, JPMorgan Chase & Co. analysts including Natasha Kaneva said in a report. Geopolitical risks have pushed prices about $7 higher than they would otherwise be, they said.
Away from the conflict, the US Energy Department said on Thursday that it aimed to buy as much as 6 million barrels for the Strategic Petroleum Reserve as it continues to replenish the stockpile after a record withdrawal.
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