Oil markets remained unaffected by Iran’s surprising assault on Israel, witnessing a downturn in prices amidst speculation that the conflict would not escalate further.
Initially, Brent crude surged by 0.7% to $91.05 per barrel but subsequently dipped below $90. Iran launched over 300 missiles and drones towards Israel, marking the first such attack from Iranian soil, albeit most were intercepted. This retaliation came following a strike in Syria that claimed Iranian military lives, an action anticipated for days.
Analysts from RBC Capital Markets LLC, including Helima Croft, suggested that if Israel refrains from retaliating, the conflict might deescalate. Despite the scale of Iran’s action being broader than past reprisals, its anticipation mitigated market impact.
Oil has remained resilient amidst geopolitical tensions, buoyed by OPEC+’s stringent supply management. However, the latest attack has heightened concerns in a region responsible for a significant portion of global crude production. The incident follows a series of clashes, notably the October assault by Tehran-backed Hamas against Israel.
Despite the severity of the situation, the Iranian mission to the United Nations indicated a temporary resolution, reducing the immediate risk of a broader conflict.
US officials, speaking anonymously, urged Israel against retaliation, emphasizing the potential for further escalation. The recent seizure of the MSC Aries by Iran near the Strait of Hormuz has compounded shipping risks in the region, particularly for vessels associated with Israel.
While market reactions were tempered, trading activity remained robust, indicating underlying concerns. The possibility of Brent reaching $100 per barrel had been under consideration before Tehran’s attack.
OPEC, including Iran, highlighted the need for vigilance in maintaining market stability amid growing demand indications, particularly from the US and China.
