Oil Prices Rise Amid Fed Rate Cut, Geopolitical Tensions

Crude oil prices were on the rise Thursday morning, following the US Federal Reserve’s decision to reduce interest rates by 0.5% on Wednesday. While the announcement briefly lifted prices on Tuesday, the surge was short-lived, as it raised concerns about the state of the US economy.

Later in the day, prices began to climb again, and by early Wednesday morning, the upward trend had resumed.

“Although the 50-basis-point cut signals tough economic conditions ahead, bearish investors were left unsatisfied as the Fed increased the medium-term rate outlook,” said ANZ analysts, as reported by Reuters.

Vandana Hari, founder of Vanda Insights, told Bloomberg, “Crude’s earlier buoyancy this week was driven by expectations of a significant Fed rate cut. Now that the cut has been made, attention will likely shift back to oil market fundamentals, which remain weak.”

Concerns about Chinese demand continue to weigh heavily on the market, and even the possibility of an escalating Middle East conflict—potentially involving Iran—failed to lift benchmark prices.

Earlier in the week, reports surfaced that thousands of pagers used by Hezbollah fighters had exploded in Lebanon. More explosions occurred in the country today, this time involving walkie-talkies and solar equipment.

According to the Associated Press, Lebanon’s health ministry confirmed that the second wave of explosions had killed at least 20 people and injured over 450.

“We are entering a new phase of the war—it requires bravery, resolve, and endurance,” said Israeli Defence Minister Yoav Gallant. He commended the country’s army and security services, describing their results as “very impressive,” though he did not provide specifics.

This geopolitical uncertainty seems to have fuelled bullish sentiment in the oil market, with some analysts now suggesting that the recent bearish trends may have been exaggerated.

Meanwhile, Citi provided optimistic news regarding China, forecasting a rise in oil prices due to increased refinery activity in the year’s final quarter. The bank estimates that higher refinery run rates could add 300,000 barrels per day to Chinese demand.