Oil rises as geopolitical tensions rise

Oil rose for a second day on tensions in the Middle East after Israel rejected a ceasefire proposal for the Gaza Strip and a risk-on mood that helped lift broader financial markets. Global benchmark Brent rose to $84 a barrel after rising 0.5% on Monday, while U.S. crude was near $79. Israel’s war cabinet unanimously rejected a ceasefire offer that Hamas accepted. The Jewish state vowed to continue military operations in Rafah, a major city in Gaza. The rise in crude came as Asian stock markets rose on Tuesday on optimism that the Federal Reserve will cut interest rates this year. Falling U.S. borrowing costs should be a plus for the country’s energy demand. Oil is recovering somewhat after posting its worst weekly decline since February. Prices have been holding higher since the beginning of the year as OPEC+ output cuts tightened the market. The demand outlook is clouded by signs of weakness in diesel, while the cartel is expected to keep supplies tight. “The demand outlook remains supported by expectations for a Fed rate cut, and the focus today will be on the EIA outlook,” said Charu Chanana, an analyst at Saxo Capital Markets Pte in Singapore. The Energy Information Administration (EIA) is set to release its Short-Term Energy Outlook later on Tuesday, which offers clues about the outlook, including the pace of U.S. supply growth. Additional comments could come from oil majors BP Plc and Saudi Arabian Oil Co., known as Aramco, when they report earnings.