Oil advanced as the Middle East braced for escalating conflict after an Israeli strike on Hezbollah targets in southern Lebanon.

Global benchmark Brent rose above US$79 a barrel, while US marker West Texas Intermediate climbed to near US$75. Israel on Sunday morning sent more than 100 warplanes to take out thousands of Hezbollah missile launchers, after which the militant group responded by firing more than 200 projectiles that did limited damage, according to Israeli officials.

Hezbollah, which is backed by Iran and designated a terrorist organization by the US, said it “concluded” its military operation for the day but that it will continue hostilities with Israel until the country agrees to a cease-fire in Gaza. 

In a sign of relative calm after the exchange of fire, negotiations in Cairo aimed at establishing a pause in the fighting between Israel and the Palestinian militia Hamas commenced as planned on Sunday. Israel also relaxed safety restrictions on its population on Sunday night, after earlier imposing a state of emergency and shutting its main airport for several hours.

Monday’s move higher has cemented oil’s return to a gain for the year, helped by political risks, and expectations of an imminent cut to interest rates in the US. Fed Chair Jerome Powell gave his most decisive signal yet that his inflation-fighting mission has been accomplished at his speech in Jackson Hole, Wyoming, on Friday, saying that “the time has come for policy to adjust.”

  - Bloomberg