U.S. crude surges to biggest gain since October after strike kills Hamas leader in Iran

U.S. crude oil futures jumped more than 4 percent on Wednesday after the assassination of Hamas political leader Ismail Haniyeh in Tehran just hours after an Israeli strike on a top Hezbollah military leader in Beirut raised fears of a possible direct conflict between Israel and Iran.

Iran’s Revolutionary Guards accused Israel of carrying out the assassination, and Supreme Leader Ayatollah Ali Khamenei said the country had a duty to punish Israel in response.

The assassination increases uncertainty over a possible ceasefire agreement in Gaza between Israel and Hamas, where Haniyeh was a senior negotiator in the talks.

In further support for oil prices, US crude inventories recorded their fifth consecutive weekly decline, marking the longest streak of crude declines since a seven-week streak between November 2021 and January 2022.

Commercial crude inventories excluding the Strategic Petroleum Reserve fell by 3.4 million barrels – Much more than expected – U.S. crude oil inventories fell to 433 million barrels in the week ending July 26, which is 4% below the five-year average for that time of year, according to the U.S. Energy Information Administration.

Gasoline stocks posted a consecutive weekly decline, falling by a larger-than-expected 3.7 million barrels to 223.8 million barrels, which is 3% below the five-year average, according to the U.S. Energy Information Administration.

“Strong exports helped offset lower refining activity and strong imports to encourage a fifth straight draw in crude inventories,” said Matt Smith, oil analyst at Kpler, calling the report “modestly supportiveHe expected oil prices to rise but added that geopolitical risks were the “main driver” of Wednesday’s rally.

Late in the session, the Federal Reserve hinted that it may be close to cutting interest rates for the first time in September, which would support growth and consumption in the United States.

Crude oil prices in New York (CL1:COM) for September delivery rose +4.2% To $77.91 per barrel, and Brent crude for September (CO1:COM) closed at $77.91 per barrel. +2.6% to $80.72 a barrel, snapping a three-day losing streak for both benchmarks.

New York Natural Gas Futures (NG1:COM) for September settled -4.2% To $2.036/MMBtu, giving up the previous day’s gains.

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Crude is still down for the full month, with WTI and Brent down 4.4% and 6.6% respectively, driven by “China’s domestic demand picture deteriorates“Crude imports ended July at their slowest monthly pace in a year and a half,” Smith said.