Brent Crude prices spent just a few hours below the $80 a barrel mark as tensions in the Middle East flared up again, pushing oil prices up by 2.5% early on Wednesday after the killing of the Hamas political leader in Iran.
In morning trade in Europe, Brent Crude prices were rising by 2.51% at $80.50, while the U.S. benchmark, WTI Crude, was rallying by 2.62% to $76.70.
Brent had fallen below the $80 per barrel threshold on Tuesday amid continued concerns about oil demand in China.
But oil prices rebounded on Wednesday, rallying in morning trade in Europe, following reports that the leader of Hamas, Ismail Haniyeh, was killed in Iran.
The assassination came just hours after Israel said it had killed Hezbollah senior commander Fuad Shukr in an air strike on Beirut, Lebanon, in retaliation for a Hezbollah strike on the Golan Heights in the weekend.
In response to the suspected Israeli assassination of the Hamas leader, Iran's Ayatollah Ali Khamenei said, as posted on his official website,
"The criminal, terrorist Zionist regime martyred our dear guest in our territory and has caused our grief, but it has also prepared the ground for a severe punishment."
"[F]ollowing this bitter, tragic event which has taken place within the borders of the Islamic Republic, we believe it is our duty to take revenge."
The initial market reaction to the escalation in the Middle East is growing fear that some kind of a direct Israel-Iran conflict could emerge, and the geopolitical price premium trumped on Wednesday concerns about weaker-than-expected oil demand in China.
While details are still emerging from Iran about the killing of the Hamas leader, the market was "allocating a higher risk premium for oil" early on Wednesday, ING commodities strategists Warren Patterson and Ewa Manthey wrote in a note early today.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More