The price of oil rose by more than 2%, continuing the recent rally, and updating the 5-week high amid ongoing geopolitical tensions in the Middle East.
Market participants expect retaliatory actions from Israel after Tehran's missile strike last week. Meanwhile, the US president warned Israel against hitting Iran's crude fields.
Iran's recent attack on Israel raised fears of a full-scale war in the Middle East, while concerns remained in the market about oil demand, especially from China (the largest oil importer). Iran’s oil output has returned to almost full capacity and could be vulnerable as tensions escalate. According to forecasts by Goldman Sachs analysts, Brent oil prices could reach $90 per barrel if oil supplies from Iran are disrupted. However, JPMorgan Chase experts doubt that Israel's response will target Tehran's energy facilities.
Investors are also looking for more policy direction from China's top economic planning body on Tuesday. Market participants are closely watching for additional policy measures as Beijing has signaled a sense of urgency in bringing its economy back on track to hit the annual growth target of “around 5%.” Experts predict that the Chinese government will expand public spending as part of its stimulus package.