Global oil prices are expected to rise on Monday morning following a shocking attack by the Hamas terrorist group in southern Israel. The situation is further exacerbated by news of an Egyptian policeman opening fire on Israeli tourists, resulting in at least two casualties, and reports of Hezbollah's involvement from southern Lebanon.
This upward push in prices marks the end of a downturn that began last week, causing Brent and US West Texas Intermediate crude prices to plummet by over 8%.
As of Friday, Brent and WTI prices settled slightly higher but remained down by 8.34% and 8.77%, respectively, with values at $US84.43 and $82.81.
Vandana Hari, CEO of Vanda Insights, anticipates a potential knee-jerk surge in crude prices when markets open on Monday, emphasising the gravity of the situation.
According to Israeli embassy sources in Turkey, approximately 300 Israelis have been killed, with nearly 2,000 in hospitals, including 19 in critical condition. Gaza Authority officials report over 250 casualties from Israeli raids, with more than 1,500 people wounded or injured.
Analysts also predict a potential rise in gold prices, which saw a slight increase of less than $US2 an ounce, closing at around $US1,847 an ounce on Friday. However, this still resulted in a small loss of just under 1% for the week.
Simultaneously, US dollar assets are expected to see a boost as investors in the region seek safety, which is a typical response during international turmoil.
Peter Cardillo, chief market economist at Spartan Capital Securities, stressed the importance of including gold in investment portfolios as a hedge against global instability, noting that the dollar tends to strengthen in such situations.
Brian Jacobsen, chief economist at Annex Wealth Management, expressed uncertainty about the long-term impact of the Israel situation on oil prices, despite Iran's increased oil production. He believes that Iran's support for Hamas could undermine any progress made with the U.S., though the potential output loss is not expected to be significant.
The key factor to watch is how Saudi Arabia responds, as Washington has been working towards normalising ties between Israel and Saudi Arabia. The impact on oil prices will likely remain limited unless the conflict escalates into a regional war involving the U.S., Iran, and other supporters of the involved parties, according to Iman Nasseri, Middle East managing director of energy consultancy Facts Global Energy.