Oil prices edged higher on Tuesday, driven by fears that the escalating conflict between Israel and Hezbollah could disrupt supply in the key Middle East region, while a developing tropical storm in the U.S. threatens to affect crude production in the Gulf of Mexico, the world’s largest oil-producing area.
Brent crude futures for November rose 67 cents, or 0.9%, to $74.57 per barrel at 2:10 pm AEST (4:10 am GMT), while U.S. crude futures for November gained 75 cents, or 1.07%, reaching $71.12 per barrel.
Despite the gains, both contracts had closed lower on Monday, as concerns over waning demand weighed on investor sentiment. Disappointing economic data from the euro zone and ongoing uncertainty around China's fuel consumption further contributed to the drop.
The ongoing conflict between Israel and Hezbollah has heightened fears of potential supply disruptions.
On Monday, Israel conducted airstrikes on Hezbollah targets in Lebanon, resulting in the deadliest day the region has seen in decades. Hezbollah, an Iranian-backed militant group, has been exchanging fire with Israeli forces since the outbreak of war between Hamas and Israel on October 7.
Further contributing to the upward pressure on oil prices is the looming threat of a hurricane in the U.S. Gulf of Mexico. Oil producers in the region have begun evacuating staff from offshore platforms as forecasts predict that a storm developing southeast of Cuba could strengthen into a hurricane by mid-week, potentially hitting vital oil-producing areas.
The U.S. National Hurricane Center expects the storm to intensify over the next 72 hours, with the possibility of severe impacts on U.S. oil output.