Oil Steadies as Traders Assess Shifting Risks in Mideast Crisis

(Bloomberg) — Oil steadied after Israel’s killing of Hezbollah’s leader, Hassan Nasrallah, with the market waiting to see how Iran will respond.

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Global benchmark Brent traded near $72 a barrel, while West Texas Intermediate was above $68. Nasrallah was killed in an air strike on Lebanon’s capital Beirut, dealing a major blow to the group and its sponsor Tehran. Israeli jets also bombed targets in Yemen following attacks this month on central Israel by Iran-backed Houthi rebels.

Iran appears to be in no rush to escalate the conflict with Israel, which has unfolded against the backdrop of the war in Gaza between the Jewish state and Hamas, which is also sponsored by Tehran. President Masoud Pezeshkian stopped short of pledging a direct attack on Israel and struck a relatively restrained note in a speech at the United Nations.

Crude remains modestly lower this year as the heightened tensions in the Middle East have so far failed to escalate into an all-out confrontation that could threaten oil supplies from the region. At the same time, global production remains ample, with OPEC+ considering whether to loosen output curbs, while China’s slowdown has hurt demand.

The recent weakness in prices “reflects that the geopolitical risk premium remains limited, and market expectations of potentially higher oil supply,” Goldman Sachs Group Inc. analysts including Daan Struyven said in a note released over the weekend. The bank kept its forecast for Brent to end the year at $74 a barrel.

The latest shift in the course of the Middle East conflict spurred heavier-than-usual trading. More than 18,000 contracts across the Brent futures curve changed hands within the trading day’s first two hours.

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