Oil prices extend gains on Mideast tensions, Wall Street retreats

LONDON: Oil markets rose further on Monday as tensions escalated in the Middle East one year after the deadly Hamas attacks on Israel, while stock markets diverged.

Major indices in New York retreated from gains made on Friday following stronger-than-expected nonfarm jobs figures that signalled the strength of the world’s largest economy.The figures led to “a sharp re-evaluation in the market’s forecasts for future Fed rate cuts”, said David Morrison, senior market analyst at Trade Nation.

Wall Street wagers have since shifted to a quarter-point interest rate cut by the US Federal Reserve, rather than a repeat of the aggressive 50-basis point cut made last month.US inflation data due later this week will be closely watched for further clues on the Fed’s thinking heading into its next call over rates.

Concerns over Europe’s biggest economy, Germany, weighed on Frankfurt’s stock market, while London and Paris nudged higher in afternoon deals.Official data showed Germany’s industrial orders fell more than expected in August, adding to fears that the country will end the year in recession.

There were sizeable gains for the Tokyo and Hong Kong stock markets, with the former boosted by a softer yen supporting Japanese exporters.Hong Kong extended a rally fuelled by China’s plans to boost its growth, notably by supporting its battered property sector and thanks to interest-rate cuts.Shanghai was closed for a holiday.

´Wild ride´

Brent North Sea crude, the international benchmark oil contract, came close to surpassing $80 per barrel for the first time since late August.Oil futures have experienced recent volatility, with Brent slumping under $70 last month on concerns about weak demand.

Israel on Monday marked the one-year anniversary of the October 7 attack, the deadliest in its history and one that sparked a devastating war in Gaza that has since expanded into Lebanon.Israel is preparing its retaliation against Iran over its missile attack last week, raising fears of all-out regional war.

Beyond Middle East tensions, oil is also being supported by hopes of stronger Chinese demand after Beijing recently announced major stimulus measures to boost its flagging economy.Offsetting price support is an expectation in the market that the OPEC+ group of oil producing nations could reverse output cuts, according to analysts.

“The oil market is on a wild ride, caught in a whirlwind of geopolitical tension, OPEC+ strategy shifts, and a slowdown from its biggest customer, China,” noted independent analyst Stephen Innes.