Energy traders are closely watching renewed fighting in Iraq, trying to gauge worst- and best-case scenarios for OPEC's second-biggest oil producer—and the coming weeks could be critical.
"This situation now certainly has the market on tenterhooks. It's why we're seeing the price of oil somewhat elevated" despite a period of relatively contained demand, said John Kilduff, founding partner of commodities-focused investment firm AgainCapital. "This is a very troubling development for the oil market for consumer nations," Kilduff said.
This month, the Iraqi government of Prime Minister Nouri al-Maliki lost control of the city of Fallujah to the Islamic State of Iraq and the Levant (ISIL), a group that wants to establish a strict religious state across western Iraq's Anbar province and eastern Syria.