Oil prices jumped on Tuesday on fresh tension in the Middle East after the Israeli military said it carried out an attack on Hamas leadership in Doha, the capital of Qatar.
Brent crude futures grew by 37 cents or 0.6 per cent to $66.39 a barrel and the US West Texas Intermediate (WTI) crude futures also climbed by 37 cents or 0.6 per cent to $62.63 a barrel.
Israel launched an aerial strike against senior Hamas leaders in Doha on Tuesday, in its first direct attack on Qatari soil, marking a significant escalation in regional tensions.
Qatar, an ally of the US which has been mediating peace efforts to end the war in Gaza, denounced the attack as “cowardly” and illegal, adding that the government “will not tolerate such reckless Israeli behaviour.”
Israel confirmed that a precise strike had been conducted on senior Hamas officials in the city, with reports saying they had gathered to discuss the recent US ceasefire proposal for Gaza.
Other allies of the US in the Middle East, including Saudi Arabia and the United Arab Emirates (UAE), promised their support to Qatar.
Market analysts noted that oil prices had also pared some gains because the attack did not create any immediate supply disruption.
Support also came from the latest oil output increase from the Organisation of the Petroleum Exporting Countries and its allies (OPEC+) being smaller than anticipated, expectations that China will continue stockpiling oil, and concerns over potential new sanctions against Russia.
Despite initial speculation that eight OPEC+ members could bring as much as 550,000 barrels per day of production back in October, the oil group agreed to raise collective output by only 137,000 barrels per day to regain market share.
There is also near-term upside risk also lingers if President Donald Trump follows through on renewed talk of Russia sanctions.
The American Petroleum Institute (API) estimated that crude oil inventories in the US rose by 1.25 million barrels in the week ending August 29. So far this year, crude oil inventories are up 8.7 million barrels. The official data from the Energy Information Agency (EIA) will be released later on Wednesday.
Also in focus is the expectation that the Federal Reserve, which meets next week, will cut U.S. interest rates. Lower rates reduce consumer borrowing costs and can boost economic growth and demand for oil.