By: AGBI

Oil prices rose for a second day on Wednesday, extending a 2 percent gain after Israel targeted senior Hamas leaders in Qatar.

Brent crude futures increased 0.8 percent to $66.93 a barrel in early trading, while WTI crude futures rose 0.9 percent to $63.16 a barrel.

Israel killed six people on Tuesday in an airstrike on Hamas’ political leadership, which is based in the Qatari capital Doha.

Qatar’s prime minister Sheikh Mohammed bin Abdulrahman Al-Thani described the attack as “state terrorism” and called for “retaliation from the whole region in the face of those barbaric actions”.

UAE President Sheikh Mohamed bin Zayed Al Nahyan strongly condemned the assault and affirmed the UAE’s steadfast support for all measures Qatar may take to safeguard its sovereignty, security and territorial integrity, the UAE state-run Wam news agency reported.

Saudi Arabia’s crown prince Mohammed bin Salman spoke with Qatar’s emir, affirming the kingdom’s “full solidarity with Qatar” and describing Israel’s actions as a “flagrant violation of international law” in remarks published by the Saudi foreign ministry.

The attack may scramble the perception of Qatar as a safe hub for business in the short term, but the Gulf state is equipped to manage even the latest crisis in a conflict that has plagued the wider Middle East for almost two years, analysts have told AGBI.

“I think this is very negative for that safehaven image,” said Hamzeh Al Gaaod, a Mena analyst with TS Lombard in London.

Qatar already struggles with sluggish foreign direct investment compared with its peers and it risks falling further behind the UAE and Saudi Arabia, which have not been targeted, Al Gaaod notes.

It is the second time in less than three months that Doha has come under fire amid a confrontation between foreign powers linked to the war between Israel and Hamas in Gaza. On June 23, Iranian missiles targeted the Al Udeid Air Base in retaliation for the US bombing of nuclear sites in Iran.

US-based Gulf economist Justin Alexander spoke with several people on the ground in Doha and said they were “shaken” but not “changing their plans.”

“However, the threat to confidence can’t be entirely discounted,” he said. 

Aviation is likely to feel some immediate impact, although it has typically recovered quickly from similar incidents in the past.

“Temporary airspace closures seem more likely and need to be considered by travellers,” said Rachel Ziemba of advisory firm Ziemba Insights in New York.

Qatar Airways issued a statement shortly after the attack saying its operations had not been disrupted. 

Cooperation between Arab countries and Israel in the gas sector may become bumpier, isolating the latter, said Karen Young, a senior research scholar at the Center on Global Energy Policy of Columbia University in New York.

“The longer term economic and energy implications could be very bad for Israel’s energy infrastructure and export potential,” she said.

US companies will still want to be in the Gulf as it is “a very attractive market” and they will see this as a “one-off event,” according to Gordon Gray, a former US Ambassador and now the Kuwait Professor of Gulf and Arabian Peninsula Affairs at the George Washington University’s Elliott School of International Affairs.

“American business people are pretty savvy. They’re pretty good at calculating risk versus potential return on investment, and if they’re working in the Middle East, they’re used to times of instability,” Gray told AGBI. 

Qatar Airways shutdown highlights Gulf airspace risks
Gulf stock markets were little moved on Wednesday, with investors seemingly unfazed by the Israeli attack. Qatar’s main index was up 0.06 percent at 11,107 points as of 11.04am Doha time as blue-chip bank stocks made minor gains.

The Dubai and Saudi Arabian benchmarks were each down 0.4 percent, extending declines that began in late August.

Gold prices held steady above $3,600 an ounce. It is known as a safe haven asset, and is up 38 percent in the year to date, supported by a weak dollar and high central bank demand.