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Oil prices have surged due to concerns that the situation in Israel and Gaza could disrupt Middle East output. Brent crude, the international benchmark, climbed by $2.25 a barrel to $86.83, while US prices also rose. The Middle Eastern region accounts for almost a third of global supply.
Hamas’s assault on Israel was the biggest escalation between the two sides for decades. Western nations condemned the attacks, and a spokesperson for Hamas, the Palestinian militant group, told the BBC that the group had direct backing for the move from Iran, one of the world’s largest oil producers.
Iran denied involvement in the assault at a UN Security Council meeting in New York, but Iranian President Ebrahim Raisi has expressed support for the attack. Energy analyst Saul Kavonic said global oil prices have risen “due to the prospect of a wider conflagration that could spread to nearby major oil-producing nations such as Iran and Saudi Arabia”.
Caroline Bain, chief commodities economist at Capital Economics, said that Iran had been increasing oil production over the course of this year despite US sanctions. Capital Economics expected demand for oil to exceed supply in the final three months of the year and “that should support higher prices”. Uncertainty over events could drive investments into US Treasury bonds and the dollar, which investors traditionally buy at times of crisis.