Oil prices climbed in Asian trading on Monday, continuing their recovery from the previous session as reports indicated no progress towards a ceasefire between Israel and Hamas, while hostilities in the region persisted.

The oil market was also supported by optimism surrounding potential U.S. interest rate cuts. Comments from Federal Reserve Chair Jerome Powell solidified expectations for a rate reduction in September, which had already triggered a rebound in oil prices on Friday.

Brent crude futures for October delivery increased by 0.8% to $79.59 per barrel, while West Texas Intermediate (WTI) crude futures rose by 0.6% to $75.45 per barrel as of 21:01 ET (01:01 GMT).

Gaza Ceasefire Remains Elusive in Cairo Talks

Reports indicated that negotiations in Cairo between Hamas and Israel over the weekend failed to produce a ceasefire agreement, reducing the likelihood of de-escalation in the 10-month-long conflict. While U.S. officials described the talks as constructive, the absence of an agreement tempered earlier optimistic statements from American representatives. Talks are expected to continue in the coming days.

Additional strikes between Hezbollah and Israel over the weekend further complicated the prospects of a ceasefire, even though both parties expressed a desire to avoid escalation.

The ongoing instability in the Middle East prompted traders to factor in a risk premium for oil, amid concerns that the Israel-Hamas conflict could potentially disrupt oil production in the resource-rich region.

Rate Cut Optimism and a Weaker Dollar Boost Oil

Increased expectations for lower U.S. interest rates also bolstered oil prices, as traders speculated that the U.S. economy was on track for a soft landing.

The U.S. dollar fell to a 13-month low, providing additional support to crude markets, as a weaker dollar makes oil more affordable for international buyers.

The Federal Reserve is widely anticipated to reduce interest rates in September, although there is still debate among traders over whether the cut will be 25 or 50 basis points.

Meanwhile, recent U.S. inventory data indicated that fuel demand remains strong, reinforcing bets that oil consumption will continue to be robust.

However, ongoing concerns about an economic slowdown in China, the world’s largest oil importer, limited the overall gains in crude prices.

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