Oil prices experienced a downward trend early Monday following a surge over the weekend due to an attack on a base in Jordan that resulted in the death of three U.S. servicemen.
Escalation of Middle East Conflict
This incident marks the first time U.S. troops have been killed in the ongoing Middle East conflict. The United States attributed the drone strike to an Iran-backed militia and vowed to retaliate.
Since the commencement of hostilities on October 7, when Hamas attacked Israel, there have been concerns about the potential widening of the war, which could pose a threat to oil supplies in the region. This region is home to some of the world's largest oil producers.
Iran Denies Involvement
Iran has denied any involvement in the strike in Jordan. However, tensions continue to escalate as Houthi rebels based in Yemen persistently target shipping vessels in the Red Sea. To safeguard global trade, the U.S. and its allies have taken actions against these militants.
According to Steve Lamar, CEO of the American Apparel & Footwear Association, around 20% of clothing and shoes imported into the U.S. are shipped via the Suez Canal. Similarly, in Europe, approximately 40% of clothes and 50% of shoes depend on the Red Sea route.
Impact on Oil Market
Amidst this geopolitical uncertainty, West Texas Intermediate, the U.S. benchmark, saw a slight decline of 0.2% to $77.83 per barrel. Brent crude, the international standard, also slipped 0.2% to $83.40 per barrel. Despite this decrease, both contracts experienced a notable 6% gain during the previous week.
Mixed Performance of Oil Stocks
Oil stocks demonstrated mixed performance in premarket trading. While Exxon Mobil and Chevron remained stable, American depositary receipts of Shell and BP recorded modest increases of 0.2% and 0.3%, respectively.