Oil futures were seen as a bellwether late Sunday, with Western diplomats and leaders warning Iran not to get involved in the Israel-Hamas war, as Israeli forces appeared on the brink of a ground invasion of Gaza.
“Energy markets were the first derivatives to drive broader market sentiment this week, with crude and not gas leading investors to trade volatility (options), as well as classic hedges like gold and Treasuries,” said Chris Weston, head of research. Melbourne-based broker Pepperstone, in a note.
Crude opened slightly lower, with West Texas Intermediate crude futures
CL00
CL.1
Oil fell 30 cents, or 0.3%, to $87.39 a barrel on the New York Mercantile Exchange late Sunday.
See: Israel-Gaza standoff threatens to rekindle US inflation, worries investors
Axios reported Saturday that Iran has He delivered a message to Israel It does not want the Israel-Hamas war to escalate, but has no choice but to intervene if Israeli action in Gaza continues.
On Sunday, Iran’s foreign minister warned against escalation, saying others in the region were ready to act. Reuters reportedCiting Iran’s semi-official Fars news agency.
“If the Zionist aggression does not stop, the hands of all parties in the region will be on the trigger,” the Fars report quoted Hossein Amiraptollahian as saying.
Israel’s military on Sunday announced the closure of its northern border with Lebanon in response to attacks by Hezbollah, amid fears the Iran-backed group could open a second front. News reports said.
“The risk of an escalation of this conflict, the opening of a second front in the north, the involvement of Iran — that’s a risk,” White House National Security Adviser Jack Sullivan said. CBS News’ Face told The NationSunday morning n. “It’s a risk we’ve been mindful of from the beginning.”
Sullivan said the risk stems from President Joe Biden’s quick move to shift naval forces, including aircraft carriers, to the eastern Mediterranean and Persian Gulf. The moves are “a very clear message to any state or any actor that wants to exploit this situation,” he said.
French President Emmanuel Macron warned Iranian President Ibrahim Raisi in a phone call on Sunday against escalating the Israel-Hamas conflict. According to Reuters.
“The President of the Republic warned President Raisi against the intensification or extension of the conflict, particularly for Lebanon,” Macron’s office said in a statement.
As for Tehran’s relations with Hezbollah and Hamas, it has a responsibility to avoid an escalation and “must do everything possible to avoid a regional explosion,” the statement added.
Oil rose sharply on Friday, with traders reluctant to hold short positions ahead of the weekend. West Texas Intermediate crude and Brent crude oil
BRN00
,
The global benchmark, both rose nearly 6% in Friday’s session.
Fears that an Israel-Hamas war, possibly involving Iran, could threaten oil supplies from the Middle East saw traders rebuild a risk premium after last Monday’s initial spike was largely erased in subsequent sessions.
The rally got a significant boost following a commitment by the G-7 nations to increase sanctions on Russian oil exports, Stephen Innes, managing partner at SPI Asset Management, noted in a note.
Fears of an uptick in the stock market on Friday lingered even as the Dow Jones Industrial Average DJIA snapped three straight weekly losses and the S&P 500 SPX posted a second straight weekly gain. Longer-term Treasury yields fell as investors pushed for government debt ratings, unwinding part of the sharp rise in yields on stocks since late July. Yields and loan prices move inversely with each other.
“A bear case for risk, given the potential for a significant rally in[European natural gas]and crude oil, increases the likelihood that Iran will curtail LNG (liquefied natural gas) movements through the Strait of Hormuz, particularly Qatar’s LNG supply (in the global LNG market 20%) again it seems unlikely at this stage but it depends on Iran’s current involvement and what new sanctions are imposed on them,” said Weston of Pepperstone[Europeannaturalgas}andcrudewouldbewherethemarketincreasestheprobabilityofIrancurtailingthemovementofLNG(liquefiednaturalgas)throughtheStraitofHormuzwherenotablyQatarLNGsupply(20%oftheglobalLNGmarket)wouldbeimpactedAgainthisseemsalowprobabilityatthisstagebutthatwilldependonIran’songoinvolvementandanynewssanctionsplacedonthem”Pepperstone’sWestonsaid[ஐரோப்பியஇயற்கைஎரிவாயு}மற்றும்கச்சாஎண்ணெய்ஆகியவற்றில்கணிசமானபேரணிக்கானசாத்தியக்கூறுகளைக்கருத்தில்கொண்டுஹார்முஸ்ஜலசந்திவழியாகஎல்என்ஜி(திரவமாக்கப்பட்டஇயற்கைஎரிவாயு)இயக்கத்தைஈரான்குறைக்கும்நிகழ்தகவைசந்தைஅதிகரிக்கிறதுகுறிப்பாககத்தார்எல்என்ஜிவிநியோகம்(உலகளாவியஎல்என்ஜிசந்தையில்20%)பாதிக்கப்படும்மீண்டும்இந்தகட்டத்தில்இதுகுறைந்தநிகழ்தகவுபோல்தெரிகிறதுஆனால்அதுஈரானின்தற்போதையஈடுபாடுமற்றும்அவர்கள்மீதுஎந்தபுதியதடைகள்விதிக்கப்படும்என்பதைப்பொறுத்தது”என்றுபெப்பர்ஸ்டோனின்வெஸ்டன்கூறினார்[Europeannaturalgas}and crudewouldbewherethemarketincreasestheprobabilityofIrancurtailingthemovementofLNG(liquefiednaturalgas)throughtheStraitofHormuzwherenotablyQatarLNGsupply(20%oftheglobalLNGmarket)wouldbeimpactedAgainthisseemsalowprobabilityatthisstagebutthatwilldependonIran’songoinginvolvementandanynewsanctionsplacedonthem”Pepperstone’sWestonsaid
