Oil prices rose sharply on Monday amid concerns about disruptions to global oil supplies due to escalating tensions in the Middle East.
The upward revision in forecast for global oil demand for the medium and long term by OPEC contributed as well to the sharp uptick in crude oil prices.
West Texas Intermediate Crude oil futures for November ended higher by $3.59 or about 4.3% at $86.38 a barrel.
Brent crude futures settled at $88.15 a barrel, gaining $3.57 or about 4.2%.
The battle between Israel and the Palestinian militan group Hamas has taken over 1,100 lives so far.
Although the Israel and Palestinian territories are not oil producers, the Middle Eastern region accounts for almost a third of global supply.
“Crude prices are rallying as a new war sparks concerns of an even tighter oil market. It seems the risk that this conflict could widen and drag in the West means the risk of future sanctions against Iran are growing,” says Edward Moya, Senior Market Analyst at OANDA. “This is not going to be a quick war between Israel and Hamas, which means we could see oil behave more like a safe-haven if the geopolitical landscape deteriorates,” he adds.
“The oil market will remain volatile as potential supply disruptions will also need to counter falling global travel demand. It still seems like oil prices are heading higher and eventually will comfortably find a home above the $90 a barrel level,” Moya says further.