As tension in the Middle East continues to escalate, crude oil prices started the week, but the bearish sentiment in the oil market is far from over, and oil prices have declined slightly after rising.

Furthermore, the world's major economies have begun an easing cycle, which has had a positive impact on oil prices, but the market is still cautious about the long-term effects of these policies.

As of press time, Brent crude futures rose 2.32% to $74.9 a barrel. Oil has fallen to a three-year low since the beginning of this month.

US WTI crude oil reached 2.4% to $72.1 last week.

However, some analysts say that as the impact of interest rate cuts subsides, the oil market may once again focus on weak demand, causing crude oil prices to once again face downward pressure.

Geographical conflict escalates and the world starts a cycle of interest rate cuts, supporting the rise in oil prices

According to CCTV International Times, Israeli media reports, an Arabic-speaking Israeli military spokesperson once again warned Lebanese citizens in Arabic on their social media accounts today, saying, “If you are close to or are in a building belonging to Hezbollah or a building it uses to store weapons and equipment, you should immediately leave the area at least 1 kilometer away or flee the area.” According to Israeli media reports, this means that the Israeli army is planning to launch a new round of large-scale air strikes against targets in Lebanon.

Analysts believe that these attacks may bring the conflict between Iran and Israel, an OPEC oil producer that supports Hezbollah, closer, and may trigger a wider war across the region.

IG analyst Yeap Jun Rong said in an interview with Reuters: “Geopolitical tension in the Middle East is increasing between Israel and Hezbollah, which may well support oil prices at risk of wider regional conflict.”

J.P. Morgan CEO Jamie Dimon also said in an interview with CNBC that the geopolitical crisis has intensified and global stability has deteriorated, which is a major risk factor for global energy issues.

“Geopolitics are getting worse and they're not getting better. There is a possibility of an accident in the energy supply. There are a lot of wars going on right now.”

Dimon previously said that the Russian-Ukrainian conflict is what he believes the world faces the biggest risk, greater than high inflation or the recession of the US economy.

Furthermore, the world's major economies have begun a cycle of interest rate cuts one after another, which has also eliminated the risk of falling crude oil prices to a certain extent.

Last week, the Federal Reserve strongly cut interest rates by 50 basis points. Previously, the ECB also cut interest rates on key deposits by 25 basis points.

Today, the People's Bank of China announced that it will reduce the reserve ratio by 0.5 percentage points in the near future to provide long-term liquidity to the financial market by about 1 billion yuan. It may also take the opportunity to lower it by another 0.25-0.5 percentage points before the end of the year.

What is the trend of oil prices? Demand remains a key issue after interest rate cuts have waned

Vandana Hari of Vanda Insights told Bloomberg: “Crude oil prices may temporarily enter consolidation to consolidate last week's gains.”

However, as the impact of interest rate cuts subsides, prices are largely digested, and traders will soon turn their attention back to the demand side. Vandana Hari said:

“Market cheers brought about by the Federal Reserve's sharp interest rate cut have boosted market popularity. But at some point, as the Federal Reserve's light fades and the oil market's attention turns back to the worsening demand situation, we may see crude oil prices face downward pressure again.”

ING commodities analysts wrote in a report last week: “European refiners cut operating rates due to poor profit margins.”

Meanwhile, US oil producers are evacuating employees from oil production platforms in the Gulf of Mexico, and a second hurricane is expected to sweep through offshore oil fields within two weeks. Several oil companies have suspended some production.