Oil prices escalate towards US$78 as mounting tensions in the Middle East

Crude oil prices escalated towards US$78 as tensions continue to mount in the Middle East. Fighting between Israel and militants in Lebanon has increased geopolitical uncertainty in oil producing countries, spiking market volatility. Light, sweet crude for August delivery rose to US$77.53 a barrel in Asian electronic trading on the New York Mercantile Exchange, midmorning in Singapore. Though no direct impact has been seen on supplies, Middle East violence continues to drive oil prices higher, as it adds nervousness to a market already placed on edge by strong global demand and a tight supply cushion. Fearing that the violence could escalate out of control, world leaders have met in St. Petersburg and produced a framework to end the crisis, and a U.N. envoy landed in Beirut for talks. The fighting comes amid persistent oil market anxieties about the West's nuclear standoff with Iran, threats of supply disruptions in Nigeria and the Gulf of Mexico hurricane season. Last year, hurricanes Katrina and Rita devastated oil and natural gas production in the Gulf of Mexico.