(Investing) – Oil prices rose Tuesday amid rising tensions in the Middle East, with traders awaiting news from the Ukraine ceasefire discussions between U.S. President Donald Trump and his Russian equivalent Vladimir Putin.
At 08:15 ET (12:15 GMT), Brent Oil Futures expiring in May rose 1.3% to $72.00 per barrel, while West Texas Intermediate (WTI) crude futures also gained 1.4% to $68.32 per barrel.
Both contracts ended nearly 0.7% higher on Monday, buoyed by geopolitical tensions in the Red Sea, and optimism surrounding China’s plan to boost consumption.
Israel resumes airstrikes in Gaza
Israel launched extensive airstrikes across the Gaza Strip earlier Tuesday, marking the most significant escalation since the January ceasefire. The Israeli military targeted multiple Hamas positions, resulting in at least 100 fatalities, according to Gaza’s Health Ministry.
Prime Minister Benjamin Netanyahu authorized these operations following stalled negotiations to extend the ceasefire and unresolved hostage situations.
His office stated that the strikes were a response to Hamas’s refusal to release hostages and rejection of proposals from U.S. envoy Steve Witkoff and other mediators.
The recent ceasefire, initiated in January, had temporarily halted a conflict that began in October 2023.
Middle East tensions had been escalated by U.S. strikes on the Houthis in Yemen.
“The Houthis are backed by Iran, which could lead to a broader escalation, particularly with President Trump saying Iran ’will be held responsible, and suffer the consequences’ if the Houthis continue attacks in the Red Sea. Unsurprisingly, the Trump administration is taking a more hawkish stance against Iran, having tightened oil sanctions since taking office,” said analysts at ING, in a note.
The Middle East region plays a pivotal role in global energy markets, and heightened tensions can lead to concerns about potential disruptions.
Ukraine ceasefire talks awaited
Traders are awaiting news coming from the talks between Trump and Putin about ending the Ukraine war later n the session.
Markets believe a potential peace negotiation would involve the easing of sanctions on Russia and the return of its crude supply to global markets, weighing on prices.
“Energy markets will be watching closely for any progress — particularly whether a potential peace deal might include the resumption of some Russian energy flows. This would be more impactful for natural gas rather than oil, given that the scope to increase natural gas flows is much bigger relative to oil,” ING added.
Fed meeting eyed
Focus is also on the Federal Reserve’s two-day meeting, scheduled to conclude on Wednesday. The central bank is widely expected to maintain the federal funds rate at its current range of 4.25%-4.50%.
Investors are particularly attentive to the Fed’s commentary on recent trade policies, including tariffs imposed by the Trump administration, which have heightened fears of a potential recession.
Escalating trade tensions have contributed to the recent decline in oil prices, with Brent crude futures trading near three-year lows around $70 per barrel earlier this month.
The prospect of prolonged trade disputes and their impact on global economic growth could dampen oil demand, exerting downward pressure on prices.
The Fed’s insights during the meeting may provide further clarity on the trajectory of the U.S. economy and could help gauge the forecast for the U.S. dollar.
Theoretically, higher interest rates typically strengthen the U.S. dollar by attracting foreign capital, making oil—priced in dollars—more expensive for holders of other currencies, which can reduce demand and put downward pressure on oil prices.
Oil supported by China stimulus
Meanwhile, the world’s largest oil importer, China, unveiled on Sunday a comprehensive plan aimed at boosting domestic consumption, signaling a strategic shift to make internal demand the primary engine of economic growth.
The sentiment was also helped by a robust economic data barrage from China, released a day earlier.
Industrial production for Jan-Feb rose 5.9%, above expectations, while retail sales for the same period jumped 4%, compared to a 3.7% rise in December.
(Ayushman Ojha contributed to this article.)
