Oil Rises as Markets Price in Higher Risk of Mideast Escalation

what happened

Oil prices climbed more than 1% after Yemen's Houthi militants said they had targeted Saudi Arabia's largest oil refinery, Market Talk reports. In midmorning trading in Europe, Brent for December delivery, which expires on Friday, was up 1.3% at $115.41 a barrel, while WTI futures gained 2% to $101.92.

Investors are increasingly pricing in the chance of further escalation in the region, even as diplomatic efforts continue between the U.S. and Iran. Analysts at ING said clearer signals will likely come only after the U.S. midterm elections on Nov. 3. If there are no renewed strikes on Iran before then, the risk premium in the market could start to fade.

why it matters

For the oil market, the key issue is the threat to supplies from the region. A strike on a major refinery and a wider conflict could keep prices supported. The outcome of the U.S. elections and the trajectory of relations with Iran will be the main drivers for Brent and WTI in the coming weeks.

market impact

Oil: risk of supply disruption from the Middle East pushes Brent and WTI higher

• ▲Brent pressure up — supply disruption risk in the Middle East after the refinery attack
• ▲WTI pressure up — the same geopolitical risk premium on regional supply

tags

instruments