Oil Spikes 5%, US Stock Futures Fall: Analysts Weigh In On Impact Of Israel-Hamas Conflict

Crude oil could break its two-day losing streak on Monday, rallying in the Asian session due to escalating geopolitical tensions in the Middle East.

What Happened: In an unexpected development, the Palestinian militant organization Hamas, which controls the Gaza Strip, launched a series of rocket attacks on Israel over the weekend. These attacks continued into Sunday and resulted in significant casualties, with over 1,100 people reported dead, including 700 Israelis, over 2,000 injured, and hundreds of civilians and military personnel held hostage in Gaza.

The international community expressed solidarity with Israel and criticized Iran for supporting the terrorists. Israel responded by declaring war on Hamas and deploying approximately 100,000 reserve troops near the Gaza border, Al Jazeera reported.

Oil On the Boil: WTI crude oil had recently slipped from its late-September peak of over $95 per barrel to $81.50 per barrel.

However, the recent tensions reignited the oil rally, with crude oil trading at $85.79 per barrel during the Asian session on Monday, marking a 5.3% gain.

The surge in oil prices is not surprising, given the Middle East’s importance as a major oil-supplying region. Any supply disruptions from the region could impact global economic growth. Analysts believe that immediate supply disruptions are unlikely unless the situation escalates further.

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Analyst Views: Vandana Hari, CEO of Vanda Insights, told CNBC, “We may see a knee-jerk surge in crude prices when markets open on Monday. There will be some risk premium factored in as a default until the market is satisfied that the event is not setting off a chain reaction and Middle East oil and gas supplies won’t be affected.”

Iman Nasseri, Managing Director of oil consultancy firm Facts Global Energy, added that if the attacks escalate into a regional war, oil prices could spiral even higher.

Market Reactions: Despite the Middle East crisis, Asian equities demonstrated resilience, although most major markets were closed for public holidays. The Chinese market, which reopened after a weeklong holiday, saw modest declines, while Australia’s market closed in the green.

U.S. stock futures, however, indicated a moderate decline, potentially reversing Friday’s rally. Nasdaq 100, S&P 500, and Dow futures were down 0.65%, 0.69%, and 0.58%, respectively. The U.S. market faces other headwinds, including concerns about earnings growth, rising interest rates, and the political stalemate following the vacant House Speaker post.

Energy stocks like Exxon Mobil Corp. XOM, ConocoPhillips COP, and Chevron Corp. CVX could come into focus when trading resumes.

Notably, economist Peter Schiff expressed surprise at the relatively muted market reaction, suggesting that oil and gold prices should have risen more significantly, while treasuries and stock market futures should have faced more significant pressure.

The United States Oil Fund, LP USO ended Friday’s session up 0.23% at $74.16, according to Benzinga Pro data. The ETF has gained 5.8% year-to-date.

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