Crude oil prices were up early on Wednesday morning following reports that the leader of Hamas, Ismail Haniyeh was killed in Iran.
Hamas confirmed the reports of his death, claiming he had been killed by a "treacherous Zionist" attack on his residence in Tehran. Haniyeh was in Iran to attend the swearing-in ceremony of the country's new president.
The news comes less than a day after Israel said it had killed Hezbollah senior commander Fuad Shukr in an air strike on Beirut in retaliation for a Hezbollah strike on the Golan Heights.
"This assassination by the Israeli occupation of Brother Haniyeh is a grave escalation that aims to break the will of Hamas," a senior Hamas official told Reuters, confirming suspicions that the death of the group's leader would lead to an escalation in the Middle Eastern conflict.
Expectations of escalation invariably push oil prices higher and this week was no exception, with both Brent crude and West Texas Intermediate adding more than $1 after hitting their lowest levels in seven weeks on Tuesday.
Even with the new war premium, however, the oil benchmarks are on course to log their biggest monthly loss since last year, according to Reuters, as worry about China's demand growth prospects remains considerable. An additional factor driving the bearish mood on oil markets is the apparent belief that OPEC+ could start bringing back production from October despite the direction that prices have taken recently.
OPEC+ said earlier this year that it might start unwinding the production cuts in the final quarter of the year if the market conditions support such a move. A downward trend is not exactly the market conditions that the cartel had in mind but apparently a lot of traders still expect the move to be made.
OPEC+ is meeting tomorrow for one of its regular monitoring meetings which is not expected to produce anything in the way of surprising news.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry. More