Oil prices rose above $80 for the first time since August, fueling Middle East tensions

Oil rose above $80 on Monday on Middle East tensions while equities fell in New York as political and interest rate worries stymied a recent rally.

Brent North Sea crude, the international benchmark oil contract, rose above $80 a barrel for the first time since late August.

Oil futures have experienced recent volatility, with Brent falling below $70 last month on concerns about weak demand, before intensifying fighting in the Middle East sent prices up 10 percent last week.

Israel is preparing to retaliate against Iran over its missile attack last week, raising fears of an all-out regional war that could include strikes on oil facilities.

In addition to Middle East tensions, oil is also being supported by hopes of stronger Chinese demand after Beijing recently announced major stimulus measures to boost its flagging economy.

Market expectations that the OPEC+ group of oil-producing nations could reverse output cuts are offsetting price support, according to analysts.

– ‘Wild Ride’ –

“Oil markets have been on a wild ride, caught in a whirlwind of geopolitical tensions, OPEC+ strategy shifts and a slowdown from China, its biggest customer,” noted independent analyst Stephen Innes.

Rising oil prices and concerns over the Middle East ended recent gains in world stock markets.

“Wall Street is on a four-week winning streak but (it’s) under pressure from a stronger dollar amid rising yields, a rally in crude oil and geopolitical and inflation concerns,” said Joe Mazzola, strategist at Charles Schwab.

European stocks closed mixed with Frankfurt slipping and gains in London and Paris.

Major indexes in New York gave back gains on Friday after a stronger-than-expected non-farm jobs report showed the world’s largest economy was in good shape but clouded the outlook for further interest rate cuts from the Federal Reserve.

David Morrison, senior market analyst at Trade Nation, said the figures “led to a sharp reassessment of market expectations for future Fed rate cuts.”

Wall Street investors are now betting on a quarter-point interest rate cut by the US Federal Reserve rather than a repeat of last month’s aggressive 50-basis point cut.

US inflation data later this week will be closely watched for further clues on the Fed’s thinking at its next policy setting meeting.

Consumer prices will be reported on Friday with producer prices on Thursday.

Friday also sees the start of the third-quarter earnings season with many banks and financial institutions reporting for the first time.

Anticipation of a slower pace of interest rate cuts has boosted the dollar.

FOREX.com analyst Fawad Razakzada said, “The market has largely given up hope of a 50 basis point cut, and inflation figures may not change that.”

Concerns over Germany, Europe’s largest economy, weighed on the Frankfurt stock market.

Official data showed that German industrial orders fell more than expected in August, adding to fears that the country will end the year in recession.

London is higher thanks to the heavy weighting of oil companies in its key indices.

Earlier, stocks in Tokyo and Hong Kong closed higher, with earlier shares lifted by a softer yen supporting Japanese exporters.

Hong Kong extended a rally fueled by China’s plans to boost its growth, particularly by supporting its battered property sector and thanks to interest-rate cuts.

Shanghai was closed for the holiday.