Oil Prices Decline as Middle East Tensions Fuel Significant Gains

Oil prices experienced a decline during Asian trading on Tuesday, pulling back after concerns about escalating conflict in the Middle East had driven significant gains over the previous week.

The oil market faced some profit-taking after reaching over one-month highs recently. Worries about potential supply disruptions in the U.S. supported oil prices, especially as the country prepared for its second major hurricane, Milton, in just a month.

Brent oil futures for December delivery fell by 0.6% to $80.42 per barrel, while West Texas Intermediate crude futures also dropped by 0.6% to $76.04 per barrel. Both contracts had previously reached more than one-month highs.

Further increases in crude prices were hindered by a stronger dollar, as expectations of smaller interest rate cuts in the U.S. bolstered the currency. Traders are particularly attentive to upcoming inflation data from the U.S. this week.

Attention was also focused on the reopening of Chinese markets after a week-long holiday, especially as China, the world’s largest oil importer, announced a series of significant stimulus measures.

### Ongoing Concerns in the Middle East

The escalating conflict in the Middle East remained a primary concern for oil markets. Hostilities between Israel and Hezbollah intensified, with Hezbollah launching numerous missiles into Israeli territory while Israel increased its offensive actions against Lebanon.

This escalation follows a series of missile strikes from Iran aimed at Israel, retaliating for its actions against Hamas and Hezbollah. Notably, Monday marked a year since Hamas’s attacks against Israeli targets reignited hostilities, with little indication of de-escalation.

Market participants anticipating a worsening situation believe it may disrupt oil supplies from the region, particularly if Israel targets Iranian oil facilities.

### Hurricane Milton’s Potential Impact

Oil markets were also on alert regarding Hurricane Milton’s effect on U.S. oil production, as the storm is predicted to traverse the Gulf of Mexico before making landfall on Florida’s west coast this week.

Although it is expected that the hurricane will largely bypass major oil infrastructure in the Gulf of Mexico, some ports in the area are likely to impose restrictions, which could disrupt oil shipments.