Uncertainty in the Middle East has sent oil prices soaring. Explore how this, along with Fed rate cut speculation, is affecting the global economy in our latest business news update.
Monday saw an increase in oil prices due to worries that the Middle East’s increased turmoil may limit regional supplies and hopes that the US’s large interest rate decrease last week would boost demand.
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At 04:15 GMT, the price of a barrel of Brent crude for November had increased by 60 cents, or 0.8%. The November contract for US oil futures was trading at $71.64, higher 64 cents, or 0.9%.
A decrease in US supply during Hurricane Francine and a US interest rate cut provided support for both contracts’ rise in the previous session. It was a second week of rising oil prices last week.
lower economic expectations from leading consumers Further increases were restricted by the US and China.
Geopolitical Strain in the Middle East and Fed Rate Cuts: The Dual Impact on Oil and Economy
“Geopolitical tensions in the Middle East have escalated between Israel and Hezbollah, potentially bolstering oil prices due to the risk of an expanded regional conflict,” stated Yeap Jun Rong, a market strategist at IG.
“However, the increase in prices has been relatively moderate, possibly indicating some skepticism about the real impact on oil supplies, considering that the Middle East conflict has been ongoing for a while without significant disruptions.”
Israeli forces and the Iranian-backed Hezbollah organization in Lebanon engaged in a fierce firefight that continued into Sunday. The Hezbollah group has been under continuous shelling for nearly a year, and on Sunday it launched rockets deep into Israeli territory.
The battle has erupted dramatically in the last week, as thousands of Hezbollah members’ pagers and walkie-talkies blew up. Israel, which has neither admitted nor disputed responsibility for the strike, was largely held to be the culprit.
Although the US rate decrease caused both oil benchmarks to rise more than 4% last week, Phillip Nova, senior markets strategist at Priyanka Sachdeva, noted in a report that the increase is being restrained by poor demand sentiment in China, the country that imports the most oil.
“There is still a high demand for fuel,” the speaker stated, citing worries about the US Federal Reserve‘s potential for mishandled labor markets in light of the recent rate cut.
The Federal Reserve of the United States lowered interest rates last Wednesday by half of a percentage point, which was a bigger drop in borrowing expenses than many had anticipated.
Interest rate reductions usually increase demand for energy and economic activity, but market players and economists worry that the Federal Reserve may witness a slowdown in the labor market.
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