Oil prices hit 7-month low

Oil prices continued their downward trend, extending losses from the lowest close in seven months as a broader selloff in financial markets overshadowed rising tensions in the Middle East.

Brent futures slipped toward $76 a barrel, erasing this year’s gains, after closing at their lowest since early January. West Texas Intermediate also dropped below $73.

Geopolitical risks and market reactions

The market is bracing for a potential retaliatory strike on Israel by Iran and regional militias in response to the assassinations of Hezbollah and Hamas officials.

The U.S. has sent defensive reinforcements to the region, heightening the geopolitical stakes. Despite these risks, the rout in global equities, driven by concerns about the economic outlook, has been a dominant factor in the recent price movements.

Oil has faced four weeks of declines, influenced by signals of faltering demand in the U.S. and China.

Over the weekend, China announced plans to spur domestic consumption, but the market remains cautious. OPEC+ supply cuts and fears that Middle East conflicts could disrupt regional production had previously supported prices.

US intelligence and expert insights

U.S. Secretary of State Antony Blinken informed G-7 counterparts that an attack on Israel by Iran and Hezbollah could begin as early as Monday, according to an Axios report citing unidentified sources. The U.S. is monitoring the situation closely, anticipating potential strikes within the next 24 to 48 hours.

“While there are growing demand concerns, geopolitical risks continue to hang over the oil market,” Warren Patterson, head of commodities strategy at ING Groep NV in Singapore, said in a note. He added that while an escalation in the Middle East may lead to short-term volatility, a sustained increase in prices would require an actual disruption to crude supply.

Saudi Arabia’s pricing strategy

Elsewhere, Saudi Arabia has raised the price of its flagship crude to Asia for the first time in three months, indicating confidence in regional demand. However, significant price cuts were made for Europe and the U.S., reflecting varying market conditions.