Product Summary: Middle East events support oil, gold prices

Crude oil prices rose on Monday as concerns grew that a bigger conflict in the Middle East could disrupt regional oil supplies, while gold edged higher on expectations of a U.S. rate cut and safe-haven demand.

Israel and oil prices will be closely watched. The Lebanese paramilitary group Hezbollah Heaviest missile exchange The incident on Sunday raised fears that the conflict in the Middle East could escalate further after 10 months of war.

October delivery Nymex crude oil (CL1:COM) rose. +1.11% up to $75.66 per barrelOctober Brent crude (CO1:COM) rose 1.15% to $79.93.

“Friday’s strength continued into early trading today, with concerns about the Middle East rising again following Israel’s preemptive strike on Hezbollah over the weekend. We expect any rally following these developments to be somewhat short-lived unless Iran intervenes more directly, as this would significantly increase oil supply risks,” ING analysts said in a note.

However, product markets remain weak and, while the upcoming refinery maintenance season could provide some support, markets with ample supply are likely to keep sentiment negative, the brokerage added.

Meanwhile, the rig count in the five major shale oil basins increased by a net three rigs, as the Permian and Anadarko Basins each gained three rigs, the Bakken Basin lost two, and the Eagle Ford Basin lost one. “The Permian and Anadarko Basins each added three rigs, marking the largest weekly gains among basins observed so far this year,” JPM Commodities Research said, adding that it does not expect a significant recovery in drilling activity for the remainder of the year.

According to JPM’s North American Commodity Research, seven more drilling rigs are expected to be added between now and the end of the year.

Elsewhere, gold prices topped $2,520 an ounce on Monday, reaching the highest level recorded last week after Federal Reserve Chairman Jerome Powell’s Jackson Hole speech boosted expectations of a September rate cut.

The market is now split between expecting a 25 or 50 basis point cut at the September Fed meeting. Lower interest rates reduce the opportunity cost of holding interest-free assets, making gold more attractive.

Moreover, developments in the Middle East have increased the attractiveness of gold as a safe-haven asset.

A look at recent commodity price movements and some ETFs