Oil drops after Israel launches ground offensive of Gaza Strip

OIL dropped even after Israel opened a new phase of its war against Hamas with a ground invasion of Gaza, with Tel Aviv taking a more cautious approach than it initially vowed.

Global benchmark Brent sank towards US$89 a barrel, after rising by the most in two weeks on Friday (Oct 27), while West Texas Intermediate fell near US$84. While Israel has sent troops and tanks into the northern Gaza Strip in retaliation for the Oct 7 attacks, it’s taking a day-by-day approach instead of a massive invasion.

Oil markets have been transfixed by the conflict in Gaza on concerns that it could spread beyond the coastal enclave and Israel, dragging in other states and groups including Iran. The region accounts for a third of global oil supplies.

Before the market’s open on Monday in Asia, both Washington and Tehran warned the conflict could still spread. The US sees an “elevated risk” of regional spillover and will keep responding to any attacks on its troops by Iranian proxies, National Security Advisor Jake Sullivan said. Iran, meanwhile, said the war may “force everyone to take action”.

Iran is the main backer of Hamas, which has been designated a terrorist group by the US and the European Union. Tehran also supports Hezbollah in southern Lebanon along Israel’s northern border. BLOOMBERG