Oil fell even after Israel committed forces to Gaza, with Tel Aviv taking a more cautious approach than initially vowed, bolstering speculation the fighting may remain contained despite rhetoric from Iran.
Global benchmark Brent sank toward $89 a barrel, after rising by the most in two weeks on Friday, while West Texas Intermediate fell near $84. While Israel has sent troops and tanks into the northern Gaza Strip in retaliation for the Oct. 7 attacks, it’s taking a day-by-day approach instead of a massive invasion.
Read More: Oil and Gas Markets Eye Escalation Risk as Gaza War Deepens
Oil markets have been transfixed by the conflict in Gaza on concerns that it could spread beyond the enclave and Israel, dragging in other states and groups such as Iran. The region accounts for a third of global oil supplies, including flows pumped by members of the Organization of Petroleum Exporting Countries.
Before crude trading started on Monday in Asia, both Tehran and Washington warned the conflict could still spread. Iran said the war may “force everyone to take action.” The US, meanwhile, saw an “elevated risk” of spillover, according to National Security Advisor Jake Sullivan.
Iran is the main backer of Hamas, which has been designated a terrorist group by the US and the European Union. Tehran also supports Hezbollah in southern Lebanon, which has forces along Israel’s northern border.
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