WTI holds steady around mid-$86.00s, over one-week high on Israel-Hamas conflict

• WTI touches a one-and-half-week high on Monday, albeit lacks follow-through buying.
• Traders now prefer to wait for fresh developments surrounding the Israel-Gaza conflict.
• Worries about tightening global supply should act as a tailwind and limit the downside.

West Texas Intermediary (WTI) Crude Oil prices reverse a modest Asian session dip to the $85.80 area and move back closer to a one-and-half-week high touched earlier this Monday. The commodity currently trades around the $86.40 region, down less than 0.20% for the day as traders seem reluctant to place aggressive bets and prefer to wait for more developments surrounding the Israel-Hamas clashes.

The evacuation deadline issued by the Israeli military to the residents of northern Gaza has been exhausted. This means that Israeli troops could launch a large-scale ground assault at any moment. Iran, meanwhile, warned on Saturday that if Israel's war crimes and genocide are not stopped then the situation could spiral out of control with far-reaching consequences. This raises the risk of a wide Middle East conflict and could affect supplies from countries in the world's top oil-producing region, which, in turn, is seen acting as a tailwind for Crude Oil prices.

This comes after the US last week toughened its stance against Russia and imposed sanctions on two shipping companies for carrying Russian Oil bought at a price greater than the $60/barrel price cap imposed by G7 countries last year. Russia is one of the world's top crude exporters and the tighter US scrutiny of its shipments could curtail global supply. Worries about tightening global supply, along with a forecast that global inventories will decline through the fourth quarter, might continue to lend some support to Crude Oil prices and favour bulls.

The upside, however, seems capped in the wake of growing worries that rapidly rising borrowing costs will dampen global economic activity and dent fuel demand. This might turn out to be the only factor that could keep a lid on any meaningful upside for Crude Oil prices. Nevertheless, the aforementioned supportive fundamental backdrop might continue to lend support to black gold and help limit any meaningful downside.

Technical levels to watch