Oil prices rose during Asian trading on Thursday, extending gains from the previous session, after the killing of a Hamas leader in Iran raised the threat of a broader Middle East conflict and concerns about its impact on oil.
Brent crude futures rose 71 cents, or 0.9%, to $81.55 a barrel by 0605 GMT, while WTI Crude futures rose 76 cents, or 1%, to $78.67 a barrel.
Hamas leader Ismail Haniyeh was killed in the Iranian capital Tehran on Wednesday. His death came less than 24 hours after the most senior military commander of Lebanon-based Hezbollah was killed in an Israeli strike in Beirut.
The killings have fueled concerns that the 10-month Gaza war between Israel and Hamas is escalating into a wider Middle East war that could disrupt oil supplies from the region.
Oil markets are rightly concerned that Haniyeh’s assassination could bring Iran more directly into war with Israel, putting Iran’s oil supplies and related infrastructure at risk.
Markets are concerned about Iran’s ability to escalate tensions by controlling the Strait of Hormuz.
Blockading the key waterway would threaten the transportation of 15-20% of global oil supplies. With limited spare pipeline capacity to bypass such a blockade, the Strait of Hormuz poses a major potential disruption risk for oil markets.
Also pushing up prices were a series of data releases from the United States, the world’s largest oil consumer, and a weakening dollar.
Strong export demand reduced U.S. crude inventories by 3.4 million barrels in the week ended July 26 to 433 million barrels, according to data released by the U.S. Energy Information Administration (EIA) on Wednesday.
Meanwhile, the U.S. dollar index extended losses from the previous session on Thursday after the Federal Reserve kept interest rates steady but left the door open for a September cut.
A weaker dollar could boost oil demand among investors holding other currencies.
But in the long term, investors are not confident about Chinese demand, a concern that is likely to continue to limit the rise in oil prices.
Official data from China on Wednesday showed that manufacturing activity in July fell to a five-month low as factories struggled with falling new orders and low prices.
A private sector survey on Thursday also showed that China’s manufacturing activity in July shrank for the first time in nine months as new orders fell.
