Oil Prices Expected to Rise Amid Iran’s Attack on Israel

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Oil prices are anticipated to climb on Monday following Iran’s attack on Israel over the weekend, analysts said, although further increases may hinge on Israel’s response to the incident.

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Iran launched drones and missiles at Israel on Saturday in retaliation for a suspected Israeli attack on its consulate in Syria earlier this month, marking a direct assault on Israeli territory and raising concerns of broader regional conflict.

Last week, fears of Iranian retaliation following the strike on its embassy supported oil prices, with global benchmark Brent crude reaching $92.18 per barrel on Friday, its highest level since October. Brent settled up 71 cents at $90.45 that day, while U.S. West Texas Intermediate crude futures rose 64 cents to $85.66. Trading was closed on Sunday.

“It is reasonable to expect stronger prices when trading resumes,” said Tamas Varga of oil broker PVM. “However fierce the initial market reaction, the rally could prove short-lived unless regional supply is significantly disrupted.”

Leaders of the Group of Seven major economies condemned Iran’s attack and reaffirmed commitment to Israel’s security during a Sunday meeting, according to the White House. Discussions included potential sanctions against Iran.

“There will likely be an immediate spike in oil and natural gas prices when Asian markets open, although crude already factored in geopolitical risk ahead of the Iranian strike,” said Amrita Sen, co-founder of consultancy Energy Aspects.

UBS analyst Giovanni Staunovo noted that oil prices might surge at the opening, with longevity of gains dependent on Israel’s response. The potential impact of G7 actions on Iranian crude exports remains a factor.

The possibility of decreased Iranian exports, a main revenue source for Iran, could push oil prices higher and affect U.S. gasoline costs, a key issue ahead of the November elections.

Attention also focuses on any implications for shipping through the Strait of Hormuz, which sees roughly one-fifth of global oil consumption flow daily. Iran’s Revolutionary Guard’s navy commander suggested Tehran could close the strait if necessary.

“Crude prices already have a risk premium, and further widening hinges largely on developments near Iran and the Strait of Hormuz,” said Ole Hansen of Saxo Bank.

In contrast to prevailing views, Viktor Katona, lead crude analyst at Kpler, suggested the Iranian attack could be slightly bearish for crude. “Iran’s statement that its retaliation is concluded might reduce the risk of broader regional conflict,” he said.


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