Oil prices jump as conflict adds to supply worries

The news: Crude oil prices climbed overnight as military clashes between Israel and Palestinian Islamist group Hamas ignited fears that a wider conflict could hit oil supply from the Middle East.

The numbers: Benchmark Brent crude oil futures jumped USD3.57, or 4.2% to USD88.15 ($137.50) a barrel on Monday, while US West Texas Intermediate crude (WTI) rose USD3.59, or 4.3%, to USD86.38.

The context: Goldman Sachs said in a note the conflict reduced the likelihood of normalisation of Israel's relations with Saudi Arabia, and the associated boost to Saudi production over time, but it does not see any immediate major effect. Other analysts suggested the implications of the conflict could include a potential slowdown in Iranian exports, which have grown significantly this year, contributing to high oil prices that could bolster inflation, forcing rate hikes that could dampen demand.