Oil futures fell on Sunday night as markets saw a quiet opening after Israel launched a ground offensive in Gaza that drew implied threats from Iran amid market fears of a wider conflict that could disrupt global crude supplies.
Oil fell as Israel “appears to be approaching the situation with caution, which brought a sense of relief that the worst-case scenarios may not materialize,” Stephen Innes, managing partner at SPI Asset Management, said in a note.
Innes, however, said investors should remember “this is probably going to be a long, long thing with a lot of false dawns.”
West Texas Intermediate crude for December delivery CL00,
-1.36%
CL.1,
-1.36%
CLZ23,
-1.36%
fell 93 cents, or 1%, to $84.61 a barrel on the New York Mercantile Exchange on Sunday night. December Brent crude BRNZ23,
-1.11%,
the global benchmark, was up $1, or 1.1%, at $89.48 a barrel on ICE Futures Europe, dipping back below the threshold of $90 per barrel.
Oil futures jumped nearly 3% on Friday, but suffered weekly declines, eroding the modest risk premium priced into the market.
Read: 4 reasons why oil prices have only seen a modest Middle East risk premium
Israeli soldiers moved at least two miles deep into the Gaza Strip as of Sunday, the Wall Street Journal reported, after beginning a delayed ground incursion into the enclave aimed at defeating Hamas following its October 7 attack on southern Israel that left more than 1,400 dead. died and saw over 200 Israelis taken hostage.
Continued bombardment of the densely populated Gaza Strip by Israel has resulted in more than 8,000 casualties, according to Palestinian authorities. Israel has been under pressure from the United States and others to minimize civilian casualties.
US stock index futures rose, with S&P 500 futures ES00,
+0.46%
up 0.3%, while futures on the Dow Jones Industrial Average YM00,
+0.34%
added 68 points, or 0.2%.
The biggest worry among investors is a conflict that sees Iran become more directly involved. Iranian crude exports have rebounded from lows seen after the Trump administration withdrew the United States from a nuclear deal with Tehran and reimposed sanctions in 2018.
A renewed crackdown on Iran could take up to 1 million barrels a day of crude off the market, while a spiraling conflict could see Tehran threaten transport choke points, particularly the Strait of Hormuz, or otherwise attack infrastructure in the region, while raising fears. award
Iranian President Ibrahim Raisi, in a post on X written in English, said Saturday that Israel had “crossed the red lines that may force everyone to act.”
US warplanes on Friday struck two sites in eastern Syria that the Pentagon said were linked to Iran’s Revolutionary Guards, following a series of attacks on US air bases in the region that began last week.
US stocks are poised to book another round of monthly losses as October winds down, although pressure has been attributed largely to a rise in Treasury yields. The S&P 500 SPX last week joined the Nasdaq Composite COMP in correction territory, while the Dow DJIA is down more than 2% year to date.
The rise in yields, which move against the price, came as US government debt failed to attract its usual haven-related buying amid rising Middle East tensions.