Oil traders braced Sunday for a potential “fear trade” that could push up crude oil prices, at least in the short term, after a surprise attack on Israel by Palestinian militants in Gaza threatened to put added scrutiny on rising Iranian oil exports.
Movements in oil prices, meanwhile, will also serve as a gauge for broader market worries around the conflict, analysts said.Hamas, the Iran-backed,Palestinian militant group that controls the Gaza Strip, staged a sweeping attack on southern Israel early Saturday. More than 600 Israelis were confirmed dead, according to Israeli authorities, with more than 2,400 injured.
Hedge-fund manager Pierre Andurand, one of the world’s best energy traders, said in a social media post that a large price spike for oil isn’t likely in coming days, but emphasized the market focus on Iran. Meanwhile, The Wall Street Journal late Friday reported that Saudi Arabia had told the White House it would be willing to boost oil production next year if crude prices remained high, as part of an effort aimed at winning goodwill in Congress for a deal that would see the kingdom recognize Israel and in return get a defense agreement with the U.S.
With the Israeli government vowing an unprecedented response, “it is hard to envision how Saudi normalization talks can run on a parallel track to a ferocious military counter offensive,” said RBC’s Croft.Stocks have stumbled, retreating from 2023 highs set in late July, as yields on U.S. Treasurys have jumped. The yield on the 30-year Treasury bond BX:TMUBMUSD30Y rose 23.2 basis points last week to end Friday at 4.941%, its highest since Sept. 20, 2007.