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Commodity markets surged on Monday as military clashes between Israel and Palestinian Islamist group Hamas raised fears that a wider conflict could affect oil supply from the Middle East and boosted demand for safe-haven assets such as gold.
Crude oil prices rose by about 4%, spot gold and benchmark copper on the London Metal Exchange climbed to one-week peaks, while several other commodities including natural gas, sugar and wheat were also higher.
"(An) attack on Israel by Hamas may push the region to war, increasing geopolitical risk bid into crude," said Tudor Pickering and Holt analyst Matt Portillo.
Brent crude was up $3.31, or 3.9%, at $87.89 a barrel by 1615 GMT, while U.S. West Texas Intermediate crude was at $86.38 a barrel, up $3.59, or 4.3%.
Hamas on Saturday launched the largest military assault on Israel in decades, triggering a wave of retaliatory Israeli air strikes on the Palestinian enclave of Gaza.
The eruption of violence threatens to derail U.S. efforts to broker a rapprochement between Saudi Arabia and Israel, in which the kingdom would normalise ties with Israel in return for a defence deal between Washington and Riyadh.
Saudi officials on Friday reportedly told the White House that they were willing to raise oil output next year as part of the proposed Israel deal.
Spot gold were up nearly 1% to $1,848.15 per ounce, having hit its highest since Sept. 29. Prices touched a seven-month low on Friday after a rally in U.S. Treasury yields.
There are a lot of questions about what could happen next in the Middle East but if the situation escalates gold prices could move towards $1,900, said Bob Haberkorn, senior market strategist at RJO Futures.
Gold is considered a safe store of value amid political and economic turmoil.
Copper prices rose to a one-week high but further gains were seen unlikely due to generally weak demand in top consumer China, a strong dollar and rising inventories.
Benchmark copper on the London Metal Exchange (LME) traded 0.5% higher at $8,085 a metric ton in official rings after earlier touching $8,142, the highest since Oct. 2.
"Things don't seem to be improving in China. The property market is still in trouble," a copper trader said.
Wheat prices on the Chicago Board of Trade were also buoyed by fears the conflict could spread and were up 0.75% at $5.72-1/4 a bushel.
"Conflicts in the Middle East generally mainly hit energy markets but we are seeing an impact on other commodities today," said Matt Ammermann, StoneX commodity risk manager.
Raw sugar prices rose by about 1% to 27 cents per lb.
Sugar prices are often influenced by trends in energy markets as cane be used to produce sugar and biofuel ethanol, particularly in top producer Brazil.
U.S. natural gas futures rose to an eight-month high with the conflict among several bullish factors which also included a possible strike by workers at liquefied natural gas (LNG) export plants in Australia.
Gas futures for November delivery on the New York Mercantile Exchange were 0.1% higher at $3.342 per million British thermal units.
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