Oil prices surged after reports indicated that Iran is preparing to launch an attack on Israel from Iraq in the coming days, elevating concerns of escalating Middle East tensions.
Axios reported, citing Israeli sources, that Iran plans to use Iraqi-based militias to strike Israel with drones and ballistic missiles.
Earlier in the week, oil prices had dropped due to Israel's limited counterattack against Iran, which eased fears of major supply disruptions. However, Standard Chartered warned that the market may have relaxed prematurely amid unresolved hostilities. While both Israel and Iran have shown restraint to avoid wider conflict, Israel reiterated it would respond “very hard” if attacked again.
The market is bracing for significant upcoming events, such as the U.S. election, a key meeting of China’s legislative body, and an OPEC+ decision on potential production increases scheduled for December. Sources close to OPEC+ suggest that the group may delay this increase, citing concerns over weak demand and rising supplies.
China’s October manufacturing activity exceeded expectations, with a private survey noting an increase after recent economic stimulus efforts. Meanwhile, residential property sales rose last month, the first year-on-year increase of 2024.
U.S. gasoline stockpiles also saw an unexpected drawdown, as demand strengthened, while crude inventories decreased amid falling imports, according to the Energy Information Administration (EIA). The U.S. hit a record-high crude production of 13.4 million barrels per day in August, further impacting global supply dynamics.
Despite recent gains, the oil market remains volatile. While prices might continue to recover, future trends will largely hinge on the U.S. election outcome and Chinese economic policies, with the possibility of additional geopolitical flare-ups adding further uncertainty.