Oil prices shot up on Tuesday, snapping a losing streak as the world held its breath over explosive Hamas negotiations that could impact crude shipments. All eyes also turned to the Federal Reserve ahead of a crucial decision on interest rates that could rock energy markets.
In morning trading turmoil, the global benchmark Brent crude futures jumped 26 cents higher to $88.67 a barrel. The more actively traded July contract leapt up 38 cents to $88.58. Over in the United States, West Texas Intermediate crude futures spiked 34 cents higher to $82.97 per barrel.
The price rally came after oil took a nosedive of over 1% on Monday. Prices have ping-ponged wildly in recent sessions as the world anxiously watched Hamas delegates exit ceasefire talks in Cairo even as Yemeni rebels targeted ships on a vital crude shipping route.
In a shocking turn of events, negotiators from the militant Palestinian group controlling Gaza abruptly left Egypt late Monday after huddling with Qatari and Egyptian mediators. They had been weighing Israel’s proposal for a phased truce to end soaring violence that has the Middle East on a knife’s edge.
But the Hamas delegation stormed out, vowing to consult with its leadership before responding within 48 hours, according to Egyptian security sources with knowledge of the situation. Whether they accept or reject the deal could be a pivotal moment impacting oil supplies.
“New hopes of a ceasefire between Israel and Hamas caused oil prices to crash at the start of this drama-filled week,” said Carsten Fritsch, an analyst at Commerzbank, his voice tense. “But the Houthis’ unrelenting attacks on ships south of Suez have put a floor under crude.”
The Iran-backed Houthi rebel group has disrupted shipping through the Red Sea chokepoint near the Suez Canal, a crucial global trade route. Any total blockade could trigger soaring oil shocks around the world.
But even as that slow-motion crisis bubbled, energy traders furiously shifted their focus to the main event this week: the Federal Reserve’s explosive monetary policy decision on Wednesday.
Stubbornly high inflation has dashed any hopes of interest rate cuts by the powerful U.S. central bank, which could supercharge the greenback and dampen oil demand from price-sensitive economies.
“The Fed showdown this week is driving crazy volatility in oil markets,” warned Yeap Jun Rong, a white-knuckled strategist at IG. “If rates stay skyscraper-high, that could turbocharge the almighty dollar while hammering the oil thirst of big economies.”
Some Fed mavens even speculated the central bank could shockingly hike rates by a quarter-point this year AND next as that brutal inflation monster proves hard to slay, despite aggressive action.
Oil prices have whipsawed as the planet’s uneven recovery churns cross-currents of crude supply constraints, geopolitical chaos and shifting economic winds. While China’s reopening unleashed pent-up demand, darkening recession clouds still loom over major economies.
In this stormy sea of unpredictability, this week’s tsunami of high-stakes events from the Hamas powder keg to the Fed’s rate volcano could spark either an oil rally or freefall. Traders better batten down the hatches!
