Oil prices extend gains on Mideast tensions, Wall Street falls

A plume of smoke billows following an Israeli air strike on the village of Khiam in southern Lebanon near the border with Israel on October 7, 2024. – Oil rose above $80 a barrel Monday, October 7, on Middle East tensions. Brent North Sea crude, the international benchmark oil contract, went above $80 per barrel for the first time since late August. (Photo by Agence France-Presse)

Oil rose above $80 a barrel Monday, October 7, on Middle East tensions while equities slid in New York as political and interest rate concerns dented the recent rally.

Brent North Sea crude, the international benchmark oil contract, went above $80 per barrel for the first time since late August.

Oil futures have experienced recent volatility, with Brent slumping under $70 last month on concerns about weak demand before intensified fighting in the Middle East sent prices soaring 10 percent last week.

Israel is preparing its retaliation against Iran over its missile attack last week, raising fears of a regional war that could involve strikes on oil facilities.

Beyond Middle East tensions, oil is also being supported by hopes of stronger Chinese demand after Beijing recently announced major stimulus measures to boost its flagging economy.

Offsetting price support is an expectation in the market that the OPEC+ group of oil-producing nations could reverse output cuts, according to analysts.

Oil market on a ‘wild ride’

“The oil market is on a wild ride, caught in a whirlwind of geopolitical tension, OPEC+ strategy shifts, and a slowdown from its biggest customer, China,” noted independent analyst Stephen Innes.

Rising oil prices played a role in Wall Street’s pullback. All three major indices fell about one percent or more.

“Wall Street is on a four-week win streak but (is) under pressure from rising yields, a rally in crude oil, and a strong dollar amid geopolitical and inflation concerns,” said Joe Mazzola, a strategist at Charles Schwab.

European shares closed mixed with Frankfurt slipping and London and Paris gaining.

Major indices in New York retreated from gains made on Friday when a stronger-than-expected nonfarm jobs report showed the world’s largest economy is in good shape but clouded the outlook for further interest rate cuts from the Federal Reserve.

The figures led to “a sharp re-evaluation in the market’s forecasts for future Fed rate cuts,” said David Morrison, senior market analyst at Trade Nation.

Wall Street investors are now betting on a quarter-point interest rate cut by the US Federal Reserve, rather than a repeat of the aggressive 50-basis point cut made last month.

US inflation data due later this week will be closely watched for further clues on the Fed’s thinking heading into its next policy setting meeting.

Consumer prices will be reported Thursday with producer prices following on Friday.

This week also sees the start of the third-quarter earnings season with a slew of banks and financial institutions being among the first to report.

Earlier, Tokyo and Hong Kong stock markets closed higher, with the former boosted by a softer yen supporting Japanese exporters.

Hong Kong extended a rally fueled by China’s plans to boost its growth, notably by supporting its battered property sector and thanks to interest-rate cuts.

Shanghai was shut for a holiday.

Key figures around 1545 GMT

Brent North Sea Crude: UP 3.7 percent at $80.93 per barrel

West Texas Intermediate: UP 3.7 percent at $77.14 per barrel

New York – Dow: DOWN 0.9 percent at 41,954.24 (close)

New York – S&P 500: DOWN 1.0 percent at 5,695.94 (close)

New York – Nasdaq Composite: DOWN 1.2 percent at 17,923.90 (close)

London – FTSE 100: UP 0.3 percent at 8,303.62 (close)

Paris – CAC 40: UP 0.5 percent at 7,576.02 (close)

Frankfurt – DAX: DOWN 0.1 percent at 19,104.10 (close)

Tokyo – Nikkei 225: UP 1.8 percent at 39,332.74 (close)

Hong Kong – Hang Seng Index: UP 1.6 percent at 23,099.78 (close)

Shanghai – Composite: Closed for a holiday

Dollar/yen: DOWN at 148.13 from 148.70 yen on Friday

Pound/dollar: DOWN at $1.3084 from $1.3122

Euro/dollar: DOWN at $1.0973 from $1.0974

Euro/pound: UP at 83.86 pence from 83.61 pence

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© Agence France-Presse