Oil edged higher after dropping the most since Hamas’ attack on Israel as Tel Aviv held off from an invasion of Gaza, containing the conflict in the Middle East for the time being.
West Texas Intermediate traded near $86 a barrel, after slumping 3.7% on Monday as bearishness prevailed in wider markets. There are growing calls within Israel to rethink the scope of a ground invasion amid fear of retaliation by Hezbollah militants from Lebanon, the fate of some 200 hostages in Gaza and the risk of Israeli military casualties, according to people familiar with the matter.
The lack of any immediate disruptions in the Middle East, the source of about of a third of the world’s crude, has seen some of the war-risk premium being eroded. WTI is still about 4% higher than before the Oct. 7 attack, however, and the main triggers for a further surge in prices include Washington ramping up compliance checks on sanctioned Iranian oil and Tehran disrupting key shipping routes.
There continues to be progress in getting hostages held by Hamas out. The group, designated a terrorist organization by the US and European Union, released two elderly women late on Monday. Qatar and Egypt were intermediaries in arranging their freedom.
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