Oil prices surged over $2 on Wednesday, rebounding from seven-week lows, following the assassination of a Hamas leader in Iran, which escalated tensions in the Middle East. Brent crude futures rose by $2.18 (2.77%) to $80.81 per barrel, while U.S. West Texas Intermediate (WTI) crude increased by $2.64 (3.53%) to $77.37 per barrel.
The weakening of the U.S. dollar also supported oil prices, as a lower dollar makes oil cheaper for holders of other currencies. Despite the increase, both Brent and WTI are on track to post their largest monthly losses since October 2023 due to ongoing concerns about weak demand from China, the world’s largest crude oil importer.
China’s manufacturing activity has contracted for three consecutive months, raising doubts about future demand. Analysts suggest that while geopolitical tensions may provide temporary support for oil prices, the underlying demand issues, particularly from China, could limit the sustainability of these gains.
The Middle East conflict has not yet impacted oil supply, and OPEC’s spare production capacity is expected to cushion any potential disruptions. OPEC+ ministers are scheduled to meet to discuss production strategies, further influencing market sentiment.