Oil prices will be on watch as Israel and Lebanese paramilitary group Hezbollah engaged in the
heaviest missile exchange on Sunday following 10 months of warfare, fueling fears of a wider conflict in the Middle East. The exchange of fire does not appear to have set off a long-feared war, but tensions remain high.
What happened: Hezbollah launched hundreds of missiles at northern Israel in retaliation for the assassination of a senior commander last month. Israel said it launched airstrikes targeting rocket launchers across southern Lebanon to stop an imminent Hezbollah attack. At least three people were killed, including a fighter with the Hezbollah-allied Amal group, and two were wounded in the strikes on Lebanon. Lt. Col. Nadav Shoshani, an Israeli military spokesman, said an initial assessment showed "very little damage" in Israel.
De-escalation: Both sides have signaled their intention of
avoiding further escalation. Hezbollah leader Hassan Nasrallah said the group had targeted an intelligence base and the operation had concluded. "At this current stage, the country (Lebanon) can take a breath," he added, seeking to assuage fears of repercussions. Israeli defense minister Yoav Gallant said he spoke with U.S. secretary of defense Lloyd Austin on avoiding regional escalation and working together to ensure Israel's defense.
Oil on watch: Oil futures were higher on Monday. Front-month Nymex crude (
CL1:COM) for October delivery
rose 2.7% at the time of writing, and October Brent crude (
CO1:COM) was
up 2.5%. Warren Patterson, head of commodities strategy at ING, said the rise was driven by
Fed Chair Powell's speech and Middle East developments. "We would expect any rally on the back of these (Middle East) developments to be rather short-lived except if Iran were to become more directly involved, as this would raise oil supply risks more meaningfully." (
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