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Oil prices likely will rise on Monday in response to Iran’s attack on Israel this weekend, analysts said.
Further price moves may depend on how Israel and the West respond to the attack. Iran on Saturday launched a barrage of more than 300 drones and missiles, most of which were intercepted by Israeli air defenses. It marked the first direct attack from Iranian territory after years of proxy warfare.
“Oil prices might spike at the opening, as this is the first time Iran struck Israel from its territory,” Giovanni Staunovo, analyst at UBS Group, said in a report. “How long any bounce will last will also depend on the Israeli response.”
U.S. President Joe Biden, facing potential voter backlash if gas prices rise during an election year, said he called for a meeting among leaders of the Group of Seven major economies on Sunday to form a diplomatic response to the Iranian attack. Iran, which pumps more than 3 million barrels of oil a day, is OPEC’s third-biggest producer of oil after Saudi Arabia and Iraq.
Escalating worries that Iran would mount an attack in response to a strike on its embassy compound in Damascus last week helped to support oil prices. Global benchmark Brent crude (CO1:COM) on Friday hit $92.18 a barrel, the highest since October, and settled at $90.45 a barrel. U.S. West Texas Intermediate crude futures (CL1:COM) rose $0.64 a barrel to $85.66 a barrel.
Shipping Traffic
Energy traders likely will scrutinize oil-tanker traffic through the Strait of Hormuz, passageway for about a fifth of global oil supplies. Any attacks on tankers may trigger jumps on oil prices.
“The spike in oil prices has been largely driven by the geopolitical risk premium in the Middle East, which is likely to persist for longer,” Eric Lee, analyst at Citigroup, said in an April 11 report.
A sustained rise in prices “in turn could drive policy reaction functions that limit the upside from the slowdown of U.S. and China strategic crude buying to OPEC+ bringing oil back in third quarter 2024,” Lee said in the report.
