Brent crude futures fell by more than 4 percent, reaching about $77.5 per barrel.
By 1315 GMT, West Texas Intermediate crude futures had fallen $2.28, or 2.96 percent, to $74.86 per barrel.
Brent exceeded $80 a barrel for the first time since August yesterday, Monday, after daily gains exceeding three percent, following the largest weekly gain in more than a year by about eight percent, in the week ending on Friday, due to increasing fears of the expansion of the conflict in the Middle East.
Norbert Röcker of investment bank Julius Baer told Reuters: “The conflict in the Middle East is escalating and raises fears of disruption to oil supplies. The most likely scenario is another mild shock if oil prices rise and then fall again before the end of the year.”
And he opened Hezbollah Today, Tuesday, is the possibility of reaching a ceasefire through negotiations with Israel, after Israeli forces escalated their operations against the Lebanese group in southern Lebanon.
Israeli Defense Minister Yoav Galant said on Tuesday that the successor to the late Secretary-General of Hezbollah, Hassan Nasrallah, had apparently been eliminated.
Prices began to rise after Iran launched a missile attack on Israel on the first of October. Israel vowed to respond and said it was considering its options and considered Iranian oil facilities a potential target.
However, some analysts believe that an attack on Iranian oil infrastructure is unlikely, and noted that oil prices could face significant downward pressure if Israel focuses on any other target.
Analysts at ANZ Bank pointed out on Friday that even if the attack targeted Iranian oil facilities, there are seven million barrels per day of spare production capacity within the Organization of the Petroleum Exporting Countries (OPEC) to compensate for the loss of its oil production.
Analyst Tamas Varga of BVM said that although the situation remains unstable due to Iran’s interference in the conflict, “threats that Israel will launch attacks on Iranian oil facilities have not yet materialized.”
Meanwhile, Hurricane Milton intensified into a Category 5 storm on its way to the US state of Florida, after forcing at least one oil and gas platform in the Gulf of Mexico in the United States to close yesterday, Monday.
Traders are awaiting the latest US crude oil inventory data, as analysts expect inventories to rise by 1.9 million barrels in the week ending October 4, according to a preliminary poll conducted by Reuters.
The American Petroleum Institute is scheduled to publish its report on US inventories at 2030 GMT today, Tuesday, followed by the official report from the Energy Information Administration at 1430 GMT tomorrow, Wednesday.
