Global oil prices dipped on Monday as international diplomatic efforts intensified to secure a ceasefire between Israel and Palestinian militants in Gaza. The ongoing conflict had stoked fears of supply disruptions from the Middle East, pushing crude prices higher last week.
Brent crude, the global benchmark for oil prices, fell by 2.2% to $103.40 per barrel in early trading. West Texas Intermediate (WTI), the key benchmark for US oil prices, also declined by 2.1% to $99.70 per barrel.
The price decline comes as US Secretary of State Antony Blinken embarked on a regional visit aimed at de-escalating the violence in Gaza. Blinken is scheduled to meet with Israeli and Palestinian officials, urging both sides to agree to a ceasefire.
The Biden administration has faced mounting pressure to intervene in the conflict, with calls for a ceasefire growing louder. The ongoing violence has resulted in the deaths of over 200 Palestinians and more than a dozen Israelis.
While the full impact of the diplomatic efforts remains to be seen, hopes for a potential ceasefire have eased concerns about potential disruptions to oil supplies from the region. The Middle East remains a key producer of crude oil, and any conflict in the region can have a significant impact on global energy prices.
Analysts caution that the situation in Gaza remains volatile, and a prolonged conflict could still lead to price spikes. The price of oil is also being influenced by other factors, including the ongoing war in Ukraine and the potential for a recession in major economies.
The war in Ukraine has disrupted global energy supplies, leading to a surge in oil and gas prices. The conflict has also heightened concerns about a wider energy crisis, as Western nations move to impose sanctions on Russia, a major oil and gas producer.
Separately, rising interest rates and inflation in major economies like the United States have raised concerns about a potential recession. A global economic slowdown could dampen demand for oil, putting downward pressure on prices.
Looking ahead, the trajectory of oil prices will likely depend on the outcome of the diplomatic efforts in Gaza, the developments in the war in Ukraine, and the overall health of the global economy. If a ceasefire is reached in Gaza and the war in Ukraine shows signs of de-escalation, oil prices could see further declines. However, a prolonged conflict in either region, coupled with a global recession, could lead to another round of price increases.