Oil falls, investors mull possible conflict escalation

Oil prices edged lower on Wednesday, as fears of disruption to supplies due to conflict in the Middle East receded, at least for the time being, Reuters reported.

Brent crude fell 49 cents, or 0.56%, to $87.16 a barrel by 1002 GMT. U.S. West Texas Intermediate (WTI) crude fell by 55 cents, or 0.64%, to $85.42.

Brent and WTI had surged more than $3.50 on Monday on concern the military clashes between Israel and Palestinian group Hamas could escalate into a broader conflict, but settled slightly lower in Tuesday’s session.

“Both WTI and Brent retreated yesterday as concerns of a sudden and unexpected supply disruption have been swept aside for now,” PVM analyst Tamas Varga said.

But Swiss trading house Mercuria sees oil prices reaching $100 a barrel if the situation in the Middle East escalates further, deputy CEO Magid Shenouda said on Wednesday.

Several Fed officials in recent days have suggested that the U.S. central bank doesn’t need to raise borrowing costs any further.

U.S. Treasury Secretary Janet Yellen said on Wednesday that she still expects the U.S. economy to experience a soft landing, despite “additional concerns” brought about by the situation in Israel.