Oil jumps over 2% on Middle East strife and US rate cut hopes

Oil jumped over 2 per cent on Tuesday to the highest in almost a month, supported by Middle East strife and investor optimism that the US Federal Reserve would soon start cutting interest rates, boosting global economic growth and fuel demand.

The rally, in thin trade with some markets closed for public holidays, added to last week’s gains of about 3 per cent after Houthi attacks on ships disrupted global shipping and trade while the Israel-Hamas conflict shows no sign of easing.

Brent crude futures were up by $1.79, or 2.3 per cent, at $80.86 a barrel by 1453 GMT and earlier reached $81.23, the highest since December 1. US West Texas Intermediate crude rose by $1.89, or 2.6 per cent, to $75.45.

Despite concern about the Middle East and the re-routing of ships, actual supply has not yet been affected. Maersk on Sunday announced the restart of shipping routes through the Red Sea, easing the concerns to some extent.

“The lack of oil supply disruptions is offsetting the support to prices from ongoing geopolitical tensions in the Middle East,” said UBS analyst Giovanni Staunovo.

Shipping companies had stopped sending vessels through the Red Sea and imposed surcharges for re-routing ships. The Red Sea connects with the Suez Canal, a major shipping route used for about 12 per cent of global trade.

Oil also found support from expectations that the Fed will cut interest rates next year. Lower interest rates cut consumer borrowing costs, which can boost economic growth and oil demand.