Oil prices experienced a significant decline on Monday following a sharp increase on Friday, as traders monitored the developments of Israel's ground invasion in Gaza. The restrained nature of the invasion has raised concerns that the conflict may escalate and spread to other Middle Eastern countries, potentially disrupting global crude oil supplies. Given that the region contributes approximately one-third of the world's oil production, this worry holds substantial weight in the market.
On Friday, oil prices surged by over 3% as Israel escalated its operations in Gaza. However, both Iran and Saudi Arabia have not directly involved themselves in the conflict thus far.
Traders are now looking ahead to the upcoming Federal Reserve interest-rate decision. It is widely anticipated that the central bank will maintain the current borrowing costs without any changes. This decision will undoubtedly impact market dynamics.
In addition, this week will also see the release of data concerning manufacturing and services growth in China. As the world's second-largest economy, any signs of strength or weakness in China can influence energy demand and subsequently affect oil prices. Given China's sluggish recovery this year, concerns have arisen regarding sustained weak energy demand. Conversely, indicators of a robust economy could push prices higher.
As of early Monday, West Texas Intermediate, the U.S. benchmark, saw a 1.5% decrease, settling at $84.28 per barrel. Brent crude, considered the international standard, also depreciated by 1.1%, reaching $89.47 per barrel.