Oil prices rally as Middle East crisis deepens, US markets indicate robust demand

U.S. crude stockpiles fell by 3.4 million barrels last week, marking five consecutive weeks of decline

Oil prices climbed in early Asian trade on July 1, building on strong gains from the previous session. The assassination of Hamas leader Ismail Haniyeh in Iran heightened the fears of a broader Middle East conflict, and spurred the rally in crude prices. Brent crude futures rose 0.8 percent to $81.51 per barrel, and US West Texas Intermediate crude futures increased 0.9 percent to $78.60 per barrel. Both the benchmarks had surged about 4 percent the day before.

The escalation followed the killing of Ismail Haniyeh in Tehran and Hezbollah's top military commander in Beirut, raising concerns that the ongoing Gaza conflict could widen and disrupt regional oil supplies. Japan's deputy UN representative warned of an imminent all-out war.

Signs of strong demand in US markets and a decline in dollar added to the momentum. US crude stockpiles fell 3.4 million barrels last week, marking five consecutive weeks of decline, while gasoline consumption hit a post-pandemic high. The US dollar's decline after the Federal Reserve left interest rates unchanged also contributed to increased oil demand from foreign investors.

(With Inputs from agencies)