London: Oil prices surged to a six-month peak last Friday and are poised to climb further following Iran’s recent assault on Israel, analysts anticipate. However, the extent of the increase hinges on Israel’s response.
Over the weekend, Iran launched drone and missile strikes on Israel in retaliation for a suspected Israeli strike on its consulate in Syria earlier this month. This marked the first direct assault on Israeli territory, heightening concerns of a broader regional conflict.
The anticipation of Iran’s response supported oil prices last week, propelling the global benchmark Brent crude to $92.18 per barrel, its highest since October. Brent settled at $90.45, up 71 cents, while U.S. West Texas Intermediate crude futures rose to $85.66. Trading remained closed on Sunday.
Tamas Varga of oil broker PVM expects prices to strengthen upon market reopening, although Iran has indicated the matter might be considered resolved, and there has been no immediate impact on production.
The Group of Seven (G7) leaders denounced Iran’s attack and reiterated their support for Israel’s security during a meeting on Sunday. Discussions included the possibility of imposing sanctions against Iran.
Amrita Sen, co-founder of Energy Aspects, anticipates an initial spike in oil and natural gas prices, driven by geopolitical tensions. However, the duration of any price surge will depend on Israel’s response and potential disruptions to regional supply.
UBS analyst Giovanni Staunovo suggests that oil prices may initially soar, with sustainability contingent on Israel’s actions and potential G7 measures targeting Iranian oil exports.
Iran has significantly boosted oil exports under the Biden administration compared to the Trump era, which could further influence prices. The possibility of decreased Iranian exports leading to higher oil prices and gasoline costs in the U.S. remains a point of political sensitivity.
The situation in the Strait of Hormuz, a crucial shipping route, also warrants attention. Iran has hinted at the possibility of closing the strait if necessary, raising concerns about disruptions to global oil flow.
Ole Hansen of Saxo Bank notes that oil prices already reflect a risk premium, with further increases dependent on developments in the vicinity of Iran and the Strait of Hormuz.
Viktor Katona, lead crude analyst at Kpler, offers a contrarian view, suggesting that the Iranian attack could have a slightly bearish effect on crude prices. He argues that Iran’s assertion of concluding its retaliation could reduce the risk of a larger regional conflict.
Read More :
