Oil prices showed a modest rise on Wednesday as the Middle East conflict took the spotlight, creating uncertainties in the market, while traders awaited key details from China’s fiscal policy meeting. Concerns over demand were tempered by the potential for further geopolitical disruptions.
Middle East Tensions Keep Investors Wary
Brent crude futures increased by 45 cents (0.6%) to $77.63 per barrel, while U.S. West Texas Intermediate (WTI) futures gained 33 cents to $73.90 per barrel. This slight rebound followed a sharp decline of over 4% the previous day, driven by potential ceasefire talks between Hezbollah and Israel. Despite these discussions, the market remains on edge due to the possibility of Israeli strikes on Iran’s oil infrastructure.
According to Phillip Nova senior market analyst Priyanka Sachdeva, “The everyday dilemma of ‘Middle Eastern headlines’ moving like a pendulum between ‘ceasefire talks’ and ‘further escalation in attacks’ has been distracting investors from reality.” Sachdeva emphasized that investor sentiment is driving short-term fluctuations, overshadowing fundamental market dynamics.
Geopolitical Risk Fuels Volatility
Tensions escalated earlier in the week following missile attacks by Iran on Israel, which had sparked an 8% surge in oil prices last week—the largest gain in over a year. Although Hezbollah’s deputy leader, Naim Qassem, appeared to show support for a ceasefire in Lebanon, his stance did not include Gaza, leaving uncertainty surrounding the broader Middle Eastern conflict.
China’s Fiscal Policy Meeting in Focus
Adding to the market’s focus is China’s upcoming announcement regarding fiscal stimulus plans, scheduled for Saturday. China’s economic policies play a crucial role in global oil demand, and traders are closely monitoring any updates that may impact consumption from the world’s second-largest oil consumer.
The oil market remains finely balanced, with traders reacting to short-term geopolitical headlines and awaiting crucial economic signals from China.