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• 70% chance Israel-Gaza war spreads, threatening oil, strategist warns
  The Israel-Hamas war has a more than 50% chance of drawing in militant groups from Lebanon or Syria,...
  The Israel-Hamas war has a more than 50% chance of drawing in militant groups from Lebanon or Syria, or producing a direct conflict with Iran — creating more oil disruptions than financial markets currently think.
  
  That’s the view of Matt Gertken, chief geopolitical strategist for Montreal-based BCA Research. He sees a 70% chance of the conflict expanding beyond Gaza in the next 12 months.
  
  Growing instability in the Middle East poses a 31% chance of major oil shocks and investors should prepare to make such shocks their base case over the next 12-24 months, according to BCA Research. Gertken recommends that investors “go long defense stocks and energy versus cyclicals.”
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• European Gas Rally Takes Breather Amid Milder Weather Forecasts
  European natural gas prices declined after rallying more than 40% last week, with traders weighing milder...
  European natural gas prices declined after rallying more than 40% last week, with traders weighing milder weather forecasts and international efforts to contain the conflict in the Middle East. Benchmark futures dropped as much as 8.5% on Monday, retreating from an eight-month high.
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• Energy Sector Commentary for Monday
  The energy sector is off to a...

  The energy sector is off to a higher start, supported by strength in the crude complex and the major market futures which are up as investors wait for more third-quarter results.

  
  

  WTI and Brent crude oil futures are kicking off the week in positive territory as market participants keep a close eye on the conflict in the Middle East to see if it escalates further. Israeli air strikes on Gaza intensified on Monday, after diplomatic efforts to arrange a ceasefire in southern Gaza to allow foreign passport holders to leave failed. Elsewhere, the United States last week imposed the first sanction on owners of tankers carrying Russian oil prices above the G7’s price cap of $60 a barrel. This afternoon the EIA will release its Drilling Productivity Report which will include updated shale oil production estimates for October and November.

  
  

  Natural gas futures are trading lower on milder than normal weather and on estimates for a weekly storage build of 88 Bcf to 92 Bcf vs the 5-yr average of 85 Bcf.

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• India, Indonesia Risk Biggest Fallout From Geopolitical Shocks
  (Bloomberg) -- A triumvirate of high oil prices, a surging dollar, and geopolitical instability are set...
  (Bloomberg) -- A triumvirate of high oil prices, a surging dollar, and geopolitical instability are set to weigh on India and Indonesia among Asia’s emerging markets, while energy exporter Malaysia may prove a rare beneficiary.
  
  “If higher oil prices persist for a prolonged period, we see India, Thailand, the Philippines, and Indonesia more vulnerable to terms of trade deterioration,” said Lavanya Venkateswaran, a senior economist at Oversea-Chinese Banking Corp. Ltd. “Moreover, as ‘twin deficit’ economies — current account and fiscal deficits — they may be more vulnerable to capital outflows.”
  
  
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• Shell shares soar on renewed focus on oil
  Shell PLC shares hit a record high as rising energy prices and the new chief...

  Shell PLC shares hit a record high as rising energy prices and the new chief executive’s stronger focus on the core oil and gas business attracted investors.

  
  Shares of the company rose as high as 2,763 pence in London today, marking a threefold increase from the pandemic-era low of 878.3 pence three years ago.
  
  The rally in Shell shares has been driven by higher commodity prices, particularly for natural gas in Europe, “and the strategic changes announced by the new CEO in June, which is likely drawing in more investors,” said Morningstar analyst Allen Good.
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