Oil prices have had a volatile week. At the beginning of the week, they were under pressure due to demand concerns. As a result, Brent fell to a seven-week low of $78.5 per barrel on Tuesday. The losses were subsequently erased before prices slipped again yesterday, Commerzbank’s commodity analyst Carsten Fritsch notes.

Oil prices have a volatile week

“At the beginning of the week, oil prices were under pressure due to demand concerns. As a result, Brent fell to a seven-week low of $78.5 per barrel on Tuesday. The mid-week reversal was triggered by increasing tensions in the Middle East after a high-ranking commander of the Shiite terrorist militia Hezbollah and a leader of the radical Islamic Hamas were killed near Beirut and Tehran, presumably in retaliatory Israeli actions.”

“Hamas, Hezbollah and Iran have in turn announced retaliation. The US expects Iran to attack Israel in the coming days. Depending on how strong this attack is, Israel could retaliate again and the conflict could escalate further. If the conflict spreads, the supply of oil from the region could also be affected. At the very least, further attacks by the Houthi rebels on merchant ships and oil tankers in the Red Sea are to be expected.”

“The ultimate risk would be a disruption to shipping through the Strait of Hormuz in the Persian Gulf. A higher risk premium on the oil price therefore seems appropriate. However, this is currently being overshadowed by demand concerns, which came back into focus yesterday following the publication of weak US economic data.”