Oil Dips After Reaching Highest Level in Over a Month Amid Middle East War Risk, Reports Reuters

Oil prices dipped slightly during early Asian trading on Tuesday as traders took profits following a surge to the highest levels in over a month on Monday. This spike was driven by escalating tensions in the Middle East, raising concerns of a potential regional conflict.

The situation intensified as Hezbollah, backed by Iran, launched rockets at Haifa, Israel’s third-largest city, prompting speculation that Israel might extend its military actions into Lebanon. This development comes one year after Hamas’s attack on Israel, which has led to ongoing conflict in Gaza.

In trading, Brent crude futures declined by 23 cents, or 0.3%, to settle at $80.70 per barrel, while U.S. West Texas Intermediate futures fell by 20 cents, also down 0.3%, to reach $76.94 a barrel. Both contracts recorded an increase of over 3% on Monday, marking the highest prices since late August and adding to a rally from the previous week that saw an increase of more than 8%—the most substantial weekly gain in over a year.

The increase in prices followed a missile attack on Israel by Iran on October 1, with Israel vowing to retaliate. There is speculation that Iranian oil facilities could be targeted, although some analysts suggest this may not happen and warn that oil prices could decline significantly if Israel opts for different targets. ANZ Bank analysts indicated that even if Iranian oil facilities were attacked, OPEC has a spare supply capacity of 7 million barrels per day that could offset any production losses.

In other news, Hurricane Milton has intensified into a Category 5 storm en route to Florida, leading to the shutdown of at least one oil and gas platform in the U.S. Gulf of Mexico.

Additionally, U.S. crude oil inventories are projected to rise by 1.9 million barrels for the week ending October 4, according to a preliminary poll. The American Petroleum Institute is scheduled to release its stockpile data later on Tuesday, ahead of the official report from the Energy Information Administration on Wednesday.