Oil prices inched higher on Monday, as escalating conflict in the Middle East raised concerns about potential disruptions to supply from the key oil-producing region, while expectations that the recent U.S. interest rate cut could boost demand provided further support to the market.
As of 1:30 pm AEST (3:35 am GMT), Brent crude futures for November delivery lifted 0.6% to $74.95 a barrel, while U.S. crude futures for November were up 0.7%, at $71.49 a barrel.
Both contracts had already seen gains in the previous trading session, buoyed by the U.S. Federal Reserve's interest rate cut and a reduction in U.S. oil supply following the impact of Hurricane Francine. Last week marked the second consecutive week of rising oil prices, signaling strong market sentiment.
The U.S. Federal Reserve's decision to cut interest rates by half a percentage point last Wednesday—a larger reduction than anticipated—has helped to drive economic optimism. Lower borrowing costs are expected to stimulate economic activity, subsequently increasing energy demand. However, market analysts remain cautious, with some concerned that the Federal Reserve's move may reflect deeper concerns about a slowing job market.
Tensions in the Middle East further also fueled market concerns. Hezbollah, the Iranian-backed militant group based in Lebanon, engaged in heavy fire with Israel over the weekend, launching rockets deep into northern Israel.