WASHINGTON, D.C. (DTN) -- Nearby-delivery oil futures on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange settled Monday's session with sharp gains triggered by a violent attack on Israel by the Palestinian militant group Hamas in an escalating conflict that could snowball into a broader war in the Middle East region.
The oil market is gripped with renewed geopolitical tensions in the Middle East after Hamas, in coordination with Hezbollah, launched a surprise attack on Israeli civilians over the weekend, killing over 1,000 people and taking over 100 hostages. As of Monday afternoon, Israeli Prime Minister Benjamin Netanyahu called on opposition leaders to immediately form a government of national unity, adding that the conflict will, "change the Middle East."
The Israeli Security Council officially declared war Saturday night for the first time since 1973, opening the door for achieving broader strategic objectives in the Gaza Strip. The next steps Israel will take in the ongoing retaliation against Hamas remains unclear, but tensions are rising over the potential involvement of Iran and even Qatar -- two large donors of the Palestinian resistance movement.
So far, Iranian officials have denied any involvement in the weekend attack on Israel. "We emphatically stand in unflinching support of Palestine; however, we are not involved in Palestine's response, as it is taken solely by Palestine itself," read the statement from Iran's mission to the United Nations.
Sources said the escalating violence in Gaza is unlikely to have any immediate impact on oil availability, but traders are still anxious about the risk of a broader conflict in one of the world's biggest crude-producing regions.
For instance, should Iran's involvement in the attack be proven, it could potentially lead to tighter sanctions on its oil exports which have been rising in recent months. In August, Iran's oil exports climbed to 2 million barrels per day (bpd), according to tanker-tracking data -- the highest level since the United States reinstated all sanctions on Tehran in 2018.
Separately, Israel has ordered Chevron to shut down natural gas production at one of two major offshore platforms it operates in the Eastern Mediterranean Sea as a safety precaution. The shutdown of the Tamar platform highlights the supply risks from the ongoing hostilities in the Middle East region. Chevron inherited Israel's Tamar and Leviathan gas fields in its $5 billion purchase of Noble Energy in 2020 and has since worked to expand into Egypt and Cyprus.
In broader markets, the U.S. dollar advanced against a basket of foreign currencies, gold rallied and global equities recouped earlier losses as investors assessed the impact of the escalating tensions in the Middle East region.
At settlement, West Texas Intermediate November futures on the New York Mercantile Exchange climbed $3.59 gallon to $86.38 per barrel (bbl) and international crude benchmark advanced to $88.15 bbl, up by $3.57 bbl. NYMEX November ULSD futures rallied $0.0658 to $2.9666 gallon, and front-month RBOB futures strengthened $0.0459 to $2.2381 gallon.
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