Oil prices fell more than $3 per barrel on Monday after Israel’s retaliatory airstrikes on Iran over the weekend avoided targeting Tehran’s oil and nuclear facilities, easing fears of supply disruptions in the Middle East.
The strikes did not impact energy infrastructure, leading to a decrease in geopolitical tensions affecting the oil market.
By 9:50 am Israel time, Brent crude futures were trading at $72.92 per barrel, down $3.13 or 4.1%, while US West Texas Intermediate (WTI) crude futures dropped $3.15 or 4.4% to $68.63 per barrel.
Both benchmarks reached their lowest levels since October 1 at the market’s open.
Iranian flag with stock graph and an oil pump jack miniature model are seen in this illustration taken October 9, 2023. (credit: DADO RUVIC/ILLUSTRATION/FILE PHOTO/REUTERS)
Oil prices gained 4% last week
Last week, oil prices had gained 4% amid volatile trading as markets speculated on Israel’s potential response to Iran’s missile attack on October 1 and the upcoming US election. Over the weekend, dozens of Israeli jets conducted three waves of airstrikes targeting missile factories and other sites near Tehran and in western Iran, marking the latest escalation between the two nations.
Analysts noted that the risk premium in oil prices decreased due to the limited scope of Israel’s strikes. Market attention may now shift toward ceasefire talks between Israel and Iran-backed armed groups like Hamas, which resumed over the weekend.
Reuters reported that Citi analysts, led by Max Layton, lowered their three-month Brent price target from $74 to $70 per barrel, citing a reduced risk premium in the near term. Tim Evans of Evans Energy in the US suggested that the market may be undervalued and that OPEC+ producers might delay planned output increases beyond December.
In October, the Organization of the Petroleum Exporting Countries and its allies (OPEC+) maintained their oil output policy, including a plan to raise production starting in December. The group is scheduled to meet on December 1 ahead of a full OPEC+ meeting.
In some cases, change has become so rapid that it is difficult when passing an empty storefront to remember what merchandise was sold from there as recently as a week ago.
Iran’s threat to block the strait has already sent shock waves through trade and transport sectors, with broader consequences expected if the regime follows through
