Oil prices surged on Monday as concerns over potential disruptions in Middle Eastern oil supplies intensified following heightened conflict in the region. The ongoing Gaza conflict, which saw a significant escalation over the weekend, has raised fears of a broader regional war that could impact global energy markets. Additionally, expectations of upcoming U.S. interest rate cuts have bolstered the outlook for global economic growth and fuel demand, contributing to the upward momentum in oil prices.

Brent crude futures rose by 37 cents, or 0.5%, to $79.39 per barrel, while U.S. crude futures increased by 36 cents, or 0.5%, to $75.19 per barrel. The price gains come amid one of the most significant clashes in over ten months of border tensions. On Sunday, Hezbollah launched hundreds of rockets and drones into Israel, prompting the Israeli military to respond with airstrikes on Lebanon. The conflict has raised concerns that the Gaza situation could escalate into a wider regional conflict involving Iran, a key Hezbollah backer, and the United States, Israel’s principal ally.

Market analysts have noted that the preemptive strikes by Israel on Lebanese targets over the weekend have heightened fears of further escalation. Tony Sycamore, an analyst at IG, stated that these developments are likely to push oil prices higher, with West Texas Intermediate (WTI) crude potentially testing the $77.50 mark and possibly reaching $80.00 in the near term.

Adding to the bullish sentiment in the oil market are expectations that the U.S. Federal Reserve will soon begin cutting interest rates. Last Friday, Federal Reserve Chair Jerome Powell signaled the possibility of imminent rate cuts, which has boosted optimism across the commodities market. Analysts at ANZ noted that the prospect of easing monetary policy is likely to support higher prices for oil and other commodities as the global economic outlook improves.

Despite the recent gains, oil prices had experienced a decline last week due to concerns about the economic outlook in major economies, which weighed on fuel demand. However, the U.S. Energy Department’s recent purchase of nearly 2.5 million barrels of oil to replenish the Strategic Petroleum Reserve has provided additional support to the market.

As tensions in the Middle East continue to unfold and the U.S. prepares for potential interest rate cuts, the oil market remains on edge, with prices expected to remain volatile in the coming days.