Oil Prices Surge Amid Israel's Attack on Iran
Market Turmoil
Oil prices experienced a significant surge on Friday following reports of Israel's attack on Iran. The news sent shockwaves through global markets, igniting concerns about potential disruptions to oil supply in the Middle East.
Price Movement
Benchmark oil contracts surged more than $3 initially before slightly easing. At 0615 GMT, Brent futures were up $1.40, or 1.61%, at $88.51 a barrel. Meanwhile, the most active U.S. West Texas Intermediate contract climbed $1.38, or 1.68%, to $83.48 per barrel.
Escalating Tensions
Israel's attack on Iranian soil marks the latest escalation in the ongoing conflict between the two nations. This tit-for-tat exchange raises fears of a deeper regional conflict that could further disrupt oil supply.
Geopolitical Risk Premium
Analysts point to rising geopolitical risk premiums, signaling a risk-off environment with increased concerns about short-term oil supply disruptions. Kelvin Wong, an analyst at OANDA in Singapore, highlights the potential for prolonged tension between Iran and Israel.
Market Strategist Insights
Jun Rong Yeap, a market strategist at IG in Singapore, underscores the significant risks posed by an Iranian counterattack, including the potential widening of the conflict to a regional scale. Yeap suggests that oil prices could remain supported as tensions continue to escalate.
Recent Events
Last weekend, Iran launched hundreds of drones and missiles in retaliation for a suspected Israeli strike on its embassy compound in Syria. While most of the projectiles were intercepted, the incident raised concerns about the possibility of further escalation.
Investor Concerns
Investors have been closely monitoring Israel's response to the Iranian drone attacks. The geopolitical risk premium in oil prices had been decreasing earlier in the week, but the latest developments have reignited concerns and led to market volatility.
Global Supply Dynamics
In addition to the Iran-Israel conflict, other factors are impacting global crude oil supply. Venezuela recently lost a key U.S. license for oil exports, while the U.S. imposed sanctions on Iran following its drone strike on Israel. These developments add further uncertainty to the oil market.
