Oil prices have surged by more than 2% following Israel’s decision to escalate its military operations into Lebanon, targeting the Iranian-backed Hezbollah group. This development comes despite a ceasefire that was announced over six weeks ago.

Impact on Oil Markets

As of early Monday trading, U.S. crude futures rose by $2.17, or 2.48%, reaching $89.53 per barrel. Similarly, Brent futures increased by $1.93, or 2.12%, to $93.05 per barrel. The renewed conflict has dampened hopes for a potential extension of the ceasefire between the U.S. and Iran, which had previously helped stabilize oil prices last week.

The conflict between Israel and Lebanon, which began on March 2, has seen Hezbollah launching rockets and drones into Israel in support of Iran. Although a ceasefire was reached in mid-April, hostilities have persisted.

Geopolitical Tensions

U.S. President Donald Trump recently stated that he would soon make a decision regarding a proposed deal to extend the ceasefire with Iran, initially announced in early April. This deal aims to provide negotiators more time to address the underlying issues, including Iran’s nuclear program. Both Israel and Iran have expressed that Hezbollah’s involvement is crucial to any agreement.

Concerns over the Strait of Hormuz, a vital shipping lane for global oil and gas, have also contributed to market volatility. IG analyst Tony Sycamore noted that mines in the strait could delay the reopening process, affecting oil supply even if a ceasefire agreement is reached.

Despite these geopolitical tensions, economic data from China over the weekend showed a slowdown in factory activity, raising concerns about the country’s economic momentum. However, supply concerns have overshadowed these economic indicators, keeping oil prices elevated.

Original reporting: Appleton, WI News Feed (HLL/CB) — read the source article.