Oil prices saw a sharp increase on Monday morning, with Brent crude surpassing $81 per barrel and WTI approaching $77.
While anticipation of an interest rate cut had already fueled positive market sentiment, it was the geopolitical tensions and supply risks that pushed prices higher.
The surge in oil prices was triggered by several key events: Israel’s strikes on Hezbollah targets in Lebanon, Russia’s large-scale missile and drone attacks on Ukraine, and Libya’s government in Benghazi declaring force majeure on all oil facilities, effectively halting production and exports.
These developments are unfolding rapidly, and here’s what we know so far:
Israel and Hezbollah in Major Escalation
Early on Sunday, Israel launched a significant preemptive strike on Hezbollah in southern Lebanon. This was the largest exchange of fire between the two since their 34-day war in 2006.
Around 5 a.m. local time, Israel deployed 100 jets to strike 40 sites in Lebanon that were allegedly preparing to launch missiles and rockets at Israel.
In response, Hezbollah claimed to have fired more than 340 rockets at 11 military targets in Israel and the Golan Heights.
These clashes are likely to hinder ceasefire negotiations currently underway in Egypt.
Russia Targets Ukraine’s Energy Infrastructure
On Sunday night and into Monday morning, Russia launched a coordinated missile and drone assault on cities and critical infrastructure across Ukraine.
President Zelensky reported that Russia launched over 100 missiles and approximately 100 attack drones overnight.
Russia stated that the strikes were aimed at crippling critical infrastructure, resulting in widespread power outages and disruptions to water supplies.
Explosions were reported in Kyiv and several other Ukrainian cities.
Libya’s Eastern Government Halts Oil Production and Exports
On Monday morning, Libya’s government in Benghazi announced the shutdown of the country’s oilfields, halting all production and exports.
Although the government is not internationally recognized, it controls the majority of Libya’s oilfields.
Tensions in Libya have escalated in recent weeks, with attempts to remove the head of the Central Bank of Libya leading to the mobilization of armed factions on both sides.
The combination of these events has significantly bolstered bullish sentiment in the oil market, setting the stage for another volatile week as the situation continues to evolve.