Oil Prices Climb After Two Days of Significant Declines

Oil prices experienced gains during Asian trading on Thursday, recovering from two days of significant losses as attention remained fixed on the ongoing Middle East conflict and anticipated stimulus measures from China, the world’s leading oil importer.

Despite the recovery in crude prices, the strength of the dollar posed a limiting factor for gains, as traders prepared for key consumer inflation data set to be released later that day. Additionally, data indicating a larger-than-expected build in U.S. oil inventories further pressured the market.

Brent oil futures for December delivery rose by 0.4% to $76.89 a barrel, while West Texas Intermediate crude futures increased by 0.4% to $72.86 a barrel. Over the previous two sessions, both contracts had fallen approximately 5%.

### Ongoing Middle East Tensions

Hostilities continue between Israel, Hamas, and Hezbollah, coinciding with the one-year anniversary of the war’s declaration. Earlier this week, reports about Hezbollah pushing for a ceasefire temporarily unsettled oil markets, although there appeared to be no substantial dialogue on the matter.

Concerns about potential disruptions to oil supply due to a broader conflict in the Middle East have recently contributed to rising oil prices, particularly following an Iranian strike on Israel. Traders remained apprehensive about further escalation, especially if Israel were to target Iranian oil facilities.

### Focus on Chinese Stimulus

Markets are closely monitoring developments regarding Chinese stimulus measures, especially after recent monetary policies seemed to fall short of expectations. Chinese officials have announced a press conference scheduled for Saturday to unveil plans for additional fiscal stimulus.

Given that China ranks as the largest oil importer globally, its economic health is crucial for the oil market, particularly as it strives to enhance economic growth while maintaining a cautious approach to implementing more stimulus.

### Impact of a Strong Dollar and U.S. CPI

The dollar’s strength has weighed heavily on oil markets this week as traders awaited indicators on interest rates ahead of key consumer price index data set to be released later on Thursday.

Concerns are growing about whether the Federal Reserve will maintain a significant pace of interest rate cuts, with market participants currently pricing in a 25 basis point reduction as the Fed’s next possible move.

Additionally, U.S. attention has turned to Hurricane Milton, which has made landfall in Florida as a category-3 storm. Fortunately, the storm has largely spared critical oil infrastructure in the Gulf of Mexico.