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Investing.com — Oil prices stabilized Tuesday after the previous session’s sharp losses, with traders continuing to focus on developments in the war between Israel and Hamas.

By 09:05 ET (13.05 GMT), the futures traded 0.1% lower at $85.44 a barrel, while the contract traded largely unchanged at $89.82.

Conflict in Gaza remains the focus

The benchmarks tumbled around 3% on Monday as a series of diplomatic missions to Israel and Gaza pushed up hopes over a deescalation in the conflict. This was also accompanied by Hamas agreeing to free some hostages.

However, Israel continued its bombardment of Gaza on Monday, and the situation remains highly fluid with the market seemingly divided over whether the conflict will continue to ease from here or flare up again, potentially dragging in other countries in this oil-rich region. 

“Although there was no further escalation in the Israel-Hamas conflict yesterday, the market remains on edge and the focus continues to be on any further developments within the region,” said analyst at ING, in a note.

European PMIs point to upcoming recession

Still, PMI data in Europe indicated a weakening economic picture, which could weigh on oil demand.

in Germany, the eurozone’s dominant economy, contracted for a fourth straight month in October, suggesting a recession is well underway. 

There was a similar story with the data for the as a whole, while Britain’s businesses reported another this month, giving the Bank of England more to think about ahead of next week’s interest rate decision.

The equivalent data from the is due later in the session.

Global oil demand to peak later this decade – IEA

The International Energy Agency released its annual World Energy Outlook earlier Tuesday, with the intergovernmental body estimating that global oil demand could see a peak of around 102 millions barrels a day by the late 2020s, with volumes shrinking from there on due to the transition to cleaner energy, especially in the transport sector. 

Additionally, the European Commission said the European Union is on track towards its goal of ending Europe’s reliance on Russian fossil fuels within this decade.

The industry group releases its latest estimate of U.S. inventories later in the session, and crude stockpiles were expected to have risen last week, while distillate and gasoline inventories fell.

The official data from the , the statistical arm of the U.S. Department of Energy, is due on Wednesday.

(Ambar Warrick contributed to this item.)