Investing.com-- Oil prices rose Thursday after Israel escalated its rhetoric against Iran, raising the possibility of a hit to supply from this oil-rich region.
At 08:25 ET (12:25 GMT), Brent oil futures rose 0.6% to $75.44 a barrel, while West Texas Intermediate crude futures rose 0.7% to $71.26 a barrel.
Israeli defense minister touts Iran strike
Traders were positioning for an escalation in the Middle East conflict after Israeli Defence Minister Yoav Gallant told air force crews that the world would understand Israel’s strength after striking Iran.
His comments were made amid growing anticipation of a strike against Iran in retaliation for an October 1 attack, which was Tehran’s second major attack on Israel in six months.
Fears of an escalation in the conflict have been a key driver of oil prices in recent months, with traders attaching a risk premium to crude on fears that Israel could attack Iran’s oil and nuclear infrastructure.
Israel also ramped up its offensive against Hamas and Hezbollah this week, prompting retaliation from the two military groups.
The escalation in the conflict comes despite a bigger push from the U.S. to broker peace in the Middle East before the Nov. 5 presidential election.
PMIs in focus
Crude prices were nursing two weeks of steep losses amid heightened concerns over slowing demand.
These concerns were added to after data showed that eurozone business activity remained in contractionary territory, as demand from both home and abroad fell despite firms barely increasing their prices.
The preliminary composite eurozone Purchasing Managers' Index, compiled by S&P Global (NYSE:SPGI), nudged up to 49.7 in October from September's 49.6 but remained below the 50 mark separating growth from contraction for a second straight month.
Business activity in Germany, Europe's largest economy, shrank in October but less steeply than in September, while the dominant services sector in France contracted at its sharpest rate in seven months, dragged down by sluggish new orders.
The PMI for Britain, outside the European Union, showed businesses reported their slowest growth in 11 months.
U.S. activity, due later in the session, is expected to be buoyed by strength in the services sector.
Any more signs of resilience in the U.S. economy are likely to further bets on a slower pace of interest rate cuts by the Federal Reserve - a notion that has dented oil markets in recent weeks.
Crude to fall further - Macquarie
Crude oil prices are on a three-month losing streak and are likely to continue to stumble through year end, analysts at Macquarie said, as weak supply and demand fundamentals will likely continue to take shine of any boost from Middle East geopolitical pressure or stimulus from China.
"[W]e anticipate a decrease in crude price through YE24 as bearish fundamentals outweigh geopolitical factors," Macquarie analysts said in a recent note.
The supply and demand outlook is at the heart of the weak fundamentals pressuring oil prices. The analysts expect a pick up in growth in the fourth quarter, driven by US production growth and the return of OPEC+ barrels at a time when oil demand growth trends below 1M barrels per day.
U.S. inventory data showed a bigger-than-expected build in crude stockpiles, according to official data released on Wednesday.
(Ambar Warrick contributed to this article.)