Geopolitical risk has well and truly returned to oil markets after Israeli strikes killed Hamas leader Ismail Haniyeh and senior Hezbollah military commander Fuad Shukr.
Oil prices spiked immediately on the news and have continued to climb, with WTI rising toward $77 and Brent breaking back well above $80.
The first of Israel’s two strikes on Tuesday was an airstrike on Beirut targeting Fuad Shukr who Israel claimed was responsible for Saturday’s rocket attack on the Golan Heights which killed 12 civilians, most under the age of 16.
Israel’s defense minister, Yoav Gallant, said Hizbollah had “crossed the red line” with the attack, and days later launched three rockets into the Haret Hreik neighborhood in Beirut. Lebanon’s Prime Minister Najib Mikati condemned “blatant Israeli aggression” and Iran’s foreign ministry condemned the attack as “a blatant violation of Lebanon’s sovereignty and territorial integrity”.
The second of the two strikes, and the one that sent oil prices spiking, came just hours later when Hamas’ political leader was killed while in Iran for the swearing-in ceremony of the country’s new president.
The strike has dramatically heightened tensions in the region and is likely to undermine Gaza ceasefire talks, with Iran, Qatar, Jordan, and Lebanon all condemning Israel.
The Supreme Leader of Iran, Ali Khamenei added to fears of a broader war by saying ““It is our Duty to take Revenge and Severely Punish the Zionist Entity for the Assassination in Iran, because the Assassination was carried out on our Soil.”
As Hamas’ leader in exile, Ismail Haniyeh played a key role in the Gaza ceasefire talk negotiations brokered by Qatar, the US, and Egypt. His killing will undoubtedly delay and potentially derail entirely those talks.
The significance of these two attacks compared to previous escalations in this conflict can be seen in recent oil price movements. Both WTI and Brent had been falling consistently for a month, hitting 7-week lows on Tuesday even after the Hezbollah rocket attack on the Golan Heights.
The geography of Tuesday’s strikes is arguably more significant than the figures involved, with strikes in Beirut and Tehran marking a significant escalation in the conflict and threatening to push the region into a full-blown war.
By Josh Owens for Oilprice.com
