Oil prices rise slightly as investors focus on Middle East tensions, US rate cut

Crude oil prices slightly increase as investors closely monitor the situation. Escalating geopolitical tensions in the Middle East and a recent interest rate reduction by the United States

Oil prices rose slightly on Tuesday as investors focused on geopolitical tensions in the Middle East and expectations that the Federal Reserve of the United States would soon begin decreasing interest rates, boosting global economic growth and fuel consumption.

Brent crude futures were up 26 cents, or 0.3%, to $79.33 a barrel by 0732 GMT, while West Texas Intermediate crude was up 16 cents, or 0.2%, to $73.72 a barrel.

Trade is light because certain markets are still closed for the Boxing Day holiday.

Oil prices have recently rebounded due to expectations of interest rate cuts and violence in the Red Sea, although Maersk's declaration of the reopening of shipping routes through the canal has soothed supply concerns to some extent, according to CMC Market analyst Leon Li.

Both benchmarks gained roughly 3% last week as Houthi attacks on ships hindered global shipping and trade, adding to Middle East tensions as the Israel-Gaza war raged on.

Maersk, a Danish shipping company, announced on Sunday that it was prepared to resume maritime operations in the Red Sea and the Gulf of Aden, citing the deployment of a US-led military operation to assure the safety of business in the region.

Shipping companies had suspended vessel transit via the Red Sea, which connects to the Suez Canal, which handles approximately 12% of international trade, and charged surcharges for re-routing ships.

Separately, Iran refuted a US report that a drone launched from Iran hit a chemical tanker in the Indian Ocean on Monday.

The Liberian-flagged, Japanese-owned, and Dutch-operated Chem Pluto ship was targeted 200 nautical miles (370 kilometers) off the coast of India, according to the Pentagon.

Oil prices were also boosted by predictions that the Fed would lower interest rates next year, following the release of US data on Friday that showed inflation was already at or below the central bank's 2% objective in some key metrics.

Lower interest rates reduce the cost of consumer borrowing, which can stimulate economic growth and oil consumption.