Oil prices climbed more than 2% on Monday after Israel ordered its military to expand operations deeper into Lebanon, reigniting concerns about Middle East stability and raising fears that renewed tensions could threaten global energy supplies.
Brent crude futures, the international benchmark, rose 2.45% to $93.35 a barrel, while U.S. West Texas Intermediate (WTI) crude futures gained 2.8% to $89.78 per barrel as investors reacted to the latest escalation in the region.
The advance came as markets reassessed geopolitical risks following Israel’s decision to intensify military operations despite a ceasefire declared in April. The move also cast doubt on expectations that diplomatic efforts involving Washington and Tehran could lead to an extension of a fragile ceasefire arrangement.
Israeli Prime Minister Benjamin Netanyahu said on Sunday that he had instructed the military to broaden its operations in Lebanon in coordination with Defense Minister Yisrael Katz.
“Together with Defense Minister Yisrael Katz, I instructed the IDF to expand the maneuver in Lebanon,” Netanyahu said.
The escalation followed U.S.-brokered talks between Israeli and Lebanese officials in Washington on Friday, discussions that had raised hopes of easing tensions along the border. Instead, the latest military developments renewed concerns that hostilities involving the Iran-backed Hezbollah group could intensify and further complicate regional diplomacy.
Energy markets have remained highly sensitive to developments in the Middle East, a region that accounts for a significant share of global oil production and exports. Traders often view any increase in military activity as a potential threat to supply flows, prompting higher crude prices.
Analysts at Goldman Sachs said risks to their oil price outlook remain balanced between the possibility of supply disruptions and weakening global demand.
The investment bank maintained its fourth-quarter 2026 forecasts of $90 per barrel for Brent crude and $83 per barrel for WTI crude. However, analysts warned that prolonged supply disruptions linked to Middle East tensions could push prices higher than expected.
At the same time, Goldman Sachs highlighted growing concerns about fuel demand, particularly in major economies. The bank estimated that weaker-than-expected retail oil sales data from China and Western Europe in April implied a downside risk of around 2 million barrels per day to its demand projections.
The warning underscores the competing forces currently influencing oil markets. While geopolitical tensions continue to support prices, slower economic activity and softer consumption trends in key markets could limit further gains.
Investors are now closely monitoring developments in the Middle East for signs of either further escalation or renewed diplomatic engagement, both of which are likely to play a crucial role in determining the direction of oil prices in the coming weeks.
Key Highlights
- Brent crude rose 2.45% to $93.35 per barrel.
- WTI crude gained 2.8% to $89.78 per barrel.
- Israel expanded military operations in Lebanon despite an April ceasefire.
- The escalation raised concerns over regional stability and oil supply risks.
- Goldman Sachs warned that both supply disruptions and weak demand could significantly impact oil prices.
- Weak fuel sales data from China and Western Europe highlighted growing demand concerns.
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