Brent crude opened at $70.34/bbl in October, surging by 15.3% to $81.1/bbl by the end of the first week following Iran’s direct missile attack on Israel. Prices averaged at $77.09/bbl in the first half of the month as supply disruption concerns mounted over fears that Israel would target Iran’s oil infrastructure, a major crude global exporter. The emergence of Hurricane Milton across Florida caused short-term higher risk premiums due to fear over supply disruptions following the closure of oil platforms across the U.S Gulf, though quickly quashed following the build of U.S crude stockpiles. Weak Chinese demand also exerted downward price pressures on Brent crude due to the increasing adoption of electric vehicles as well as the slowdown in economic growth. Despite the Chinese Finance Minister’s economic stimulus package, industrial profits revealed the largest decline since the pandemic at 27.1% in September, compared to the same period last year. In the latter half of October, prices averaged lower at $73.75/bbl as fears of an Israeli attack on Iranian oil infrastructure were alleviated after Joe Biden urged Israel to revise its offensive plan. The end of October saw a decline in the crude price to $72/bbl as Israel’s retaliatory attacks on Iran avoided Iranian oil infrastructure and facilities which alleviated supply disruption fears. Trader concerns shifted towards the reduction in U.S. stockpiles, declining more than anticipated in the final week of October, as well as weakening Chinese demand. At the end of the month, Brent crude traded around $73 /bbl as Middle East conflict persisted.

GBP traded at a high of $1.338 against the USD at the start of October, however faced a downward trajectory against the USD throughout the month following statements from the Bank of England’s Governor signalling aggressive interest rate cuts. GBP contracted to around $1.290 against the USD by mid-month as the USD gained grounds after economic data revealed a positive outlook for the U.S economy. U.S non-farms payroll data exhibited a decline in the unemployment rate to 4%, whilst CPI data showed that inflation fell to 2.4% in September, down 0.1% from August. The release of UK data throughout October reflected positive economic growth, as the UK employment rate declined by 0.1% to 4% in September. However, GBP averaged at approximately $1.294 against the USD throughout the latter half of October following the release of UK CPI data which revealed that inflation declined more than market expectations throughout the previous month to 1.7%, which strengthened investor anticipations of Bank of England rate cuts. The GBP continued to lose momentum throughout the month as forecasts displayed slower rate cuts by the U.S Federal Reserve compared to the projected ‘activist’ approach by the Bank of England. GBP steadied at around $1.29 against the USD at the end of October following the UK Labour party’s budget announcement which laid out the upcoming fiscal policies.

The geopolitical risk premium heightened prices from the onset of the month after Iran launched a direct missile attack on Israel in response to the killings of senior Hamas and Hezbollah members. Fears of a retaliatory attack on Iranian oil facilities mounted as disruptions to the Straits of Hormuz would disturb an estimated one third of crude global traffic flows. Risk premiums were further heightened due to fears of a wider regional war as Israel expanded its offensive in Lebanon. However, concerns were alleviated following statements from Israeli Officials that military bases may be targeted instead, fuelled by Biden’s discouragement of the targeting of oil infrastructure. Meanwhile, data revealed that oil trade flows through the Bab-El-Mandeb strait in the Red Sea significantly declined in the first 8 months of 2024, as a result of Yemeni-based Houthi attacks on vessels which subsequently switched to the longer route around the southern cape of Africa. Furthermore, frictions within OPEC+ persists due to members failing to adhere to production targets, leading to excess supply and undermining the central OPEC strategy of price stabilisation.