Oil rises as Israel-Hezbollah clash fuels uncertainty

Oil prices have climbed today as tensions escalate in the Middle East following Israel's pre-emptive strike against militant group Hezbollah's positions in southern Lebanon. The potential for wider conflict in the region has raised concerns about oil supply disruptions.

As of 05:18 GMT the Ice front-month October Brent contract was at $79.52/bl, higher by 53¢/bl from its settlement on 23 August when the contract ended $1.80/bl higher.

The Israeli military launched an air operation involving approximately 100 aircraft to neutralise Hezbollah missile launchers. This action came in response to Hezbollah's attack on Israel, which included hundreds of rockets and drones, marking one of the most severe clashes in nearly a year of continuing hostilities.

The timing of these strikes coincided with negotiations in Egypt's Cairo aimed at brokering a ceasefire in Gaza. Hezbollah, backed by Iran, claimed to have fired 320 Katyusha rockets at Israeli targets, describing this as the initial phase of retaliation for Israel's elimination of a high-ranking Hezbollah commander the previous month.

While Israel's foreign minister Israel Katz stated that the country was not seeking a full-scale war, Israeli prime minister Benjamin Netanyahu issued a warning, suggesting that further action might be forthcoming.

Houthis add to threats

Adding to the regional tensions, Yemen's Houthi rebels, also supported by Iran, expressed support for Hezbollah's actions and reiterated their own threats against Israel.

The situation in the Red Sea remains precarious, with the Houthis claiming responsibility for an attack on a Greek-flagged oil tanker, the Suexmax Sounion. This incident has not only raised shipping security concerns but also poses potential environmental risks in the area.

The Houthis on 23 August posted a video of what they said was an explosion set off by its fighters on the Sounion, carrying 150,000t (1.1mn bl) of crude. The stricken tanker, which is adrift and unmanned, is "both a navigational and an imminent environmental hazard", according to the EU's naval force Operation Aspides, an EU defensive maritime security operation under the EU Common Security and Defence Policy.

By Janet Ong