Oil had its biggest weekly increase since February and the $A stood near one-year lows as investors worried the Israel-Hamas conflict could spread.
Worries about the prospects of a wider Middle East conflict have prompted investors to wager on oil and safe-haven assets such as gold and bonds, giving a wide berth to the Australian dollar, which touched a one-year low early this month.
On Monday, the Brent oil benchmark slipped just 0.3 per cent to $US90.63 a barrel. Oil futures leapt almost 6 per cent on Friday, sealing the biggest weekly gain since February. West Texas Intermediate crude, which jumped 5.9 per cent last week, edged down 0.4 per cent to $US87.32 on Monday. He said direct engagement between Israel and Iran would mean the possibility of conflict in the Strait of Hormuz, the narrow waterway controlled by Iran which accounts for up to 20 per cent of global oil transit.
“We believe the oil price warrants a risk premium of $US5 to $US10 per barrel due to the supply risk, and maintain our short-term price target of $US100,” said Daniel Hynes, a senior commodity strategist at ANZ.The surge in the price of oil caused petrol prices in Australia to jump above $2 a litre. While the Reserve Bank generally looks past month-to-month volatility in petrol prices,
Investors also sought the safety of bonds amid the unease around the MidEast. The US 10-year bond yield fell to 4.66 per cent, inching from a 16-year peak of 4.89 per cent. Australian bond yields drifted lower, with the 10-year return at 4.47 per cent.
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