Oil prices pop after Hamas attack on Israel but analysts foresee limited gains

Crude oil and gold futures bump higher Sunday night in response to the Hamas attack on Israel, which has caused the death of at least 700 Israelis so far and the abduction of dozens of Israeli citizens and soldiers.

WTI November crude oil (CL1:COM) +3.5% to $85.73/bbl, and December Brent crude (CO1:COM) +3.2% to $87.33/bbl, while December Comex gold (XAUUSD:CUR) +0.9% to $1,861.80/oz.

ETFs: (NYSEARCA:USO), (BNO), (UCO), (SCO), (USL), (DBO), (DRIP), (GUSH), (NRGU), (USOI), (NYSEARCA:GLD), (GDX), (GDXJ), (IAU), (NUGT), (PHYS), (GLDM), (AAAU), (SGOL), (BAR), (OUNZ)

Analysts generally expect a “knee-jerk surge” in crude prices but limited gains thereafter, provided the conflict does not expand into a regional war – which is far from certain, since the fighting is on the doorstep of an important oil-producing and exporting region.

If Iranian involvement in the attack is affirmed, the U.S. could increase enforcement of sanctions on Iran’s crude exports, which recently have moved back toward pre-2018 levels.

Saudi Arabia is not expect to slow oil production in solidarity with the Palestinians, but the war could derail normalization talks and cancel any additional Saudi oil flows that may have resulted.

But if Israel were to strike any Iranian infrastructure, crude oil prices would spike immediately on the perceived risk of a disruption.

Analysts also say the conflict could cause buying in perceived safe-haven assets like gold and the dollar, and potentially boost demand for U.S. Treasuries, which have been selling off sharply.

Early readings indicate losses for the stock market when trading opens Monday, with S&P futures -0.7%; the bond market will be closed Monday for Columbus Day.