Oil advances as Israel’s strike in Qatar revives risk premium

[DOHA] Oil jumped after an Israeli attack in Qatar escalated the conflict in the Middle East, the source of about a third of the world’s supplies, increasing the geopolitical risk premium for crude.

West Texas Intermediate climbed about 1.5 per cent to top US$63 a barrel after the Israel Defense Forces conducted a strike in Doha targeting the senior leadership of Hamas, which has been declared a terrorist group by the US and Europe. Several blasts were heard in the city, according to media reports, and Qatar said the attack violated international law.

The strike is the first Israeli attack in Doha since the beginning of the nearly two-year long conflict that has roiled global oil markets. The incident stands to jeopardise US efforts to reach a peace deal between Israel and Hamas, which could have syphoned any remaining Middle East risk premium out of crude. Israel said it takes full responsibility for the attack and that it was a “wholly independent” operation.

“The most important impact of this is a negative impact on ongoing ceasefire talks between Israel-Hamas,” said Gregory Brew, an analyst with Eurasia Group. “The other crucial element is the impact on US relations with Qatar, which hosts a major US military base.”

Qatar has reinforced its role as an international middleman throughout the Israel-Hamas conflict, at one point helping to mediate a short-lived ceasefire between the warring sides. Doha also has drawn criticism from Israeli and American leadership for its willingness to host Hamas’ political bureau.

Elsewhere, Ukraine is forging ahead with a military campaign targeting Russia’s energy infrastructure, striking part of the Kuibyshev-Lysychansk oil pipeline overnight.

Oil had already climbed before the Israeli strike, following equities higher amid mounting expectations the Federal Reserve will lower borrowing costs. US stocks have since pared gains. BLOOMBERG