Israel has vowed to destroy Hamas and is preparing for a ground offensive against Gaza. Oil prices were flat on Monday after rising last week as investors waited to see whether the Israel-Hamas conflict will affect other countries.
Brent futures were flat at $90.89 a barrel at 04:19 GMT. West Texas Intermediate (WTI) crude oil fell 2 cents to $87.67 per barrel.
Both benchmarks rose nearly 6% on Friday, their biggest daily percentage gains since April, as investors priced in the possibility of a broader conflict in the Middle East.
While Brent increased by 7.5% on a weekly basis, WTI increased by 5.9%.
Investors are trying to understand the impact of the conflict, with a large-scale ground offensive yet to begin 24 hours after Israel first notified residents of the northern half of Gaza to flee south.
The impact that could affect oil-producing countries is reflected in prices to some extent, but if an actual land invasion occurs and affects oil supplies, prices could quickly exceed $100 per barrel.
Israel is not a major producer, and the conflict in the Middle East has had little impact on global oil and gas supplies.
But the war between the Islamist group Hamas and Israel has raised concerns about a potentially serious escalation involving Iran since Russia invaded Ukraine last year. This poses one of the most significant geopolitical risks for oil markets.
Market participants are weighing what a broader conflict could mean over supplies from countries in the world’s largest oil-producing region, including Saudi Arabia, Iran, and the United Arab Emirates.
In case Tehran is found to be directly involved in the Hamas attack, it would likely result in the United States fully enforcing sanctions on Iran’s oil exports.
The United States turned a blind eye to sanctions on Iran’s oil exports this year as it sought to improve diplomatic relations with Iran. Otherwise, the 0.5-1 million barrel per day increase in Iran’s oil exports this year, equivalent to 0.5-1% of the global oil supply, risks being canceled if US sanctions are fully implemented.
As Israel vows to destroy Hamas and prepares for a ground offensive against Gaza, Iran warned on Saturday that the situation could spiral out of control with “far-reaching consequences” if Israel’s “war crimes and genocide” are not stopped.
Amid fears of an escalation in the conflict, Blinken will return to Israel on Monday to extend the diplomacy after several days of shuttle diplomacy between Arab states.
Last week, the United States imposed the first sanctions on tanker owners carrying Russian oil above the G7 price ceiling of $60 per barrel.
Russia is one of the world’s largest exporters of crude oil, and U.S. interference with its shipments could restrict global supplies.
