LONDON, U.K., December 30 — Global oil prices surged more than $1 on Monday as escalating Middle East tensions and renewed Ukraine conflict fears rattled markets. Recent diplomatic advancements were eclipsed by the two geopolitical problems, reversing a previous sell-off motivated by expectations for peace.
Why did oil prices rise sharply on Monday?
Oil prices climbed due to two simultaneous geopolitical flashpoints threatening global supply stability. In the Middle East, fresh Saudi airstrikes in Yemen fueled concerns over potential supply disruptions. At the same time, hopes for a short-term peace agreement in Ukraine—a dispute with major ramifications for the energy market—were dashed by Russia’s accusation of a Ukrainian drone strike on a presidential mansion. These events shifted trader focus squarely back to supply risks.
What is happening in Yemen?
Tensions escalated in Yemen’s eastern Hadramout province. The Saudi-led coalition warned it would counter any military moves by the Southern Transitional Council (STC) that undermined de-escalation. This followed clashes on Thursday that killed two STC fighters. Saudi airstrikes reportedly targeted STC forces in the area on Friday. Analysts noted this fresh instability is keeping “supply-disruption headlines in play” for the oil market.
How did the Ukraine situation affect markets?
Russia accused Ukraine of launching a drone attack on President Vladimir Putin’s residence, stating it would review its position in peace talks. Ukraine dismissed the claim as a “false justification” for further strikes. This directly undermined the optimistic sentiment from Friday, when oil prices had fallen over 2% on rising hopes for a Ukraine peace deal following diplomatic signals from U.S. President Donald Trump.
What are the other factors influencing oil prices?
Beyond geopolitics, several fundamental factors are at play:
Strong Chinese Demand: UBS analyst Giovanni Staunovo cited strong Chinese waterborne crude imports as helping tighten physical oil markets.
Price Floor: Staunovo added that $60 a barrel represents a “soft floor” for Brent crude, with prices expected to recover slightly in 2026.
U.S. Inventory Data: The market is awaiting delayed weekly U.S. inventory data. An extended Reuters poll forecast a draw in crude stocks but builds in distillate and gasoline for the week ended December 19.
Also Read: Russia-Ukraine War: Moscow Alleges Drone Attack on Putin Residence, Vows Response
FAQs:
Q: What were the exact price movements?
A: As of 1:18 p.m. ET, Brent crude futures rose $1 (1.7%) to $61.64 a barrel. U.S. West Texas Intermediate crude was up $1.10 (1.9%) at $57.84.
Q: Was there any positive diplomatic news from Ukraine?
A: Yes, prior to the drone allegations, Ukrainian President Zelenskiy stated “significant progress” had been made in talks with U.S. President Trump, with teams set to meet next week. Trump also held a “positive call” with Putin, according to the White House.
Q: What is the key price level to watch for Brent crude?
A: According to UBS analysis, $60 per barrel is currently viewed as a key support level, or “soft floor,” for Brent prices.