Northern Israel witnessed heightened tensions after Israeli air forces intercepted a Hezbollah UAV on August 25, 2024. The Israeli military launched pre-emptive strikes in Lebanon following the detection of preparations for “large-scale” attacks by Hezbollah, an Iran-backed militant group. In retaliation, Hezbollah fired over 320 rockets at Israel, targeting military positions. The exchange of fire raised concerns about a potential wider conflict in the region.
Vivek Dhar, a mining and energy commodities strategist at the Commonwealth Bank of Australia, noted that the Middle East tensions are likely to keep oil prices elevated. Oil prices surged after Israel conducted airstrikes in Lebanon, and Hezbollah responded by launching rockets into Israel. U.S. West Texas Intermediate crude rose by 0.75% to $75.39 a barrel, while Brent crude increased by 0.67% to $79.55.
Hezbollah attributed its strikes to the killing of senior commander Fuad Shukr in Beirut by Israel. The Israeli military stated that its pre-emptive strikes aimed to thwart a potential major attack by Hezbollah. Cedric Chehab, managing director at BMI, stated that the recent exchange of fire does not necessarily indicate an imminent all-out war.
Chehab emphasized that Hezbollah and Iran sought to demonstrate deterrence rather than engage in full-scale conflict. While there is a risk of escalation, both Israeli and Iranian leaders are cautious about triggering a broader confrontation. Vivek Dhar agreed with Chehab, indicating that the events on Sunday may not lead to a region-wide war.
Despite the escalating tensions, Dhar suggested that there is still room for de-escalation. He highlighted the importance of monitoring the Gaza truce talks as an indicator of potential outcomes in the region. The lack of agreement over a ceasefire in recent talks underscored the challenges of resolving conflicts in the area.
Dhar forecasted that Brent futures could trade between $75 and $85 a barrel in September, with the possibility of increased volatility if truce talks falter. The risk of a wider conflict in the Middle East remains a significant factor that could impact oil prices in the coming months.