Oil Market Reacts: 3% Surge as Israeli Strikes on Iran Rattle Investors.
Oil prices experienced a significant surge of $3 per barrel on Friday following reports of Israeli missile strikes on a site in Iran, triggering concerns about potential disruptions in Middle East oil supply. While benchmark contracts initially spiked and then moderated slightly, Brent futures rose by $2.63, or 3%, reaching $89.74 per barrel, with the most active U.S. West Texas Intermediate contract climbing by $2.56, or 3.1%, to $84.66 per barrel.
Reports from U.S. news outlet ABC News suggested that Israeli missiles had targeted a site in Iran, leading to explosions at an airport in the Iranian city of Isfahan, according to Iran’s Fars news agency. Although the cause of the explosions was not immediately confirmed, several flights were reportedly diverted over Iranian airspace.
Warren Patterson, head of commodities strategy at ING, highlighted the potential for further escalation and concerns regarding oil supply disruptions if the reports were confirmed. The fear of heightened tensions stems from speculation that Israel may be responding to Iran’s recent drone and missile attack, which occurred last weekend following a suspected Israeli strike on Iran’s embassy compound in Syria. Despite the majority of drones and missiles being intercepted before reaching Israeli territory, the incident raised geopolitical concerns.
Investors had been closely monitoring Israel’s response to the Iranian attacks, with the geopolitical risk premium in oil prices gradually diminishing earlier in the week amid expectations of moderated Israeli retaliation under international pressure.
In addition to the developments in the Middle East, global crude oil supply faced further complications as Venezuela lost an essential U.S. license permitting oil exports to international markets. The U.S. also imposed sanctions on Iran in response to its drone strike on Israel, intensifying geopolitical tensions within OPEC.
The confluence of these events underscores the volatility and geopolitical sensitivity of global oil markets. Any escalation in regional conflicts could potentially impact oil supply and prices worldwide.
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