Global oil prices on Wednesday, October 28, resumed growth after two trading sessions of decline. Investors assess the risk of a new large-scale US military operation against Iran after the mid-term elections to the US Congress, and also monitor the results of the parliamentary elections in Israel.
This is reported by Bloomberg with reference to oil market participants and analysts.
On the morning of October 28, December Brent crude futures rose by 1.69% to $115.81 per barrel. American West Texas Intermediate (WTI) with similar delivery terms increased by 1.68% to $101.58 per barrel, according to ANSA data as of 07:42 Rome time.
The impetus for the resumption of price growth was a report by The Wall Street Journal about a possible new military campaign by Washington against Tehran.
According to the publication, the US authorities have warned several Gulf states about the need to prepare for a short-term but intense military operation after the US mid-term elections scheduled for November 3.
President Donald Trump has not yet made a final decision on resuming large-scale strikes on Iran. At the same time, according to WSJ sources, the American leader is leaning towards conducting a new military operation after the vote.
Reports of a possible escalation have once again heightened oil market participants' concerns about the stability of energy supplies from the Middle East. New hostilities could create additional risks to oil infrastructure and maritime shipping in the Persian Gulf.
ING's head of commodity strategy Warren Patterson noted that the market is already pricing in a higher probability of a repeated escalation of the conflict.
He expects prices to remain sensitive to events in the Persian Gulf, primarily to the decision of the US administration on further actions against Iran after the congressional elections.
Another source of uncertainty is the parliamentary elections in Israel held on October 27. According to preliminary vote count results, the political bloc of Prime Minister Benjamin Netanyahu is ahead of opposition forces led by Gadi Eisenkot.
However, neither of the two main political blocs has yet received enough parliamentary seats to form a parliamentary majority. This creates a risk of prolonged coalition negotiations or repeat elections.
The election outcome matters for Israel's future policy on Iran. Netanyahu advocates increasing military pressure on Tehran, while Eisenkot, also supporting opposition to Iran's nuclear program, is skeptical about the possibility of regime change in Iran through military means.
Wednesday's price increase came after two days of decline in oil quotes. Earlier, market participants reacted positively to the intensification of diplomatic contacts between Iran and other regional states.
In particular, representatives of Saudi Arabia, Turkey, and Pakistan visited Tehran to discuss ways to reduce tensions. According to Iranian state media, the participants agreed to continue consultations.
However, diplomatic efforts have not yet eliminated risks to the oil market. Since the beginning of the year, Brent has almost doubled in price amid the US and Israeli war against Iran, supply disruptions, and threats to shipping in the region.
Further price dynamics will largely depend on Washington's decisions after the November 3 elections, the development of negotiations on Iran, and the security situation along key oil supply routes.
Sources: Bloomberg, The Wall Street Journal, ANSA
