The escalating conflict between Iran and Israel has sent ripples through the global oil market, triggering concerns over supply disruptions and potential price shocks. Following Iran's missile barrage on Israel, oil prices surged by nearly 10%, reflecting heightened fears of a broader conflict. Analysts from Citigroup and Goldman Sachs have warned of a possible sharp rise in oil costs, emphasizing the critical role Iran plays in oil exports.
Despite the initial rally, oil prices have recently retreated as investors reassess the likelihood of sustained conflict. Brent and WTI futures fell over 1.5% as traders took profits, while remaining alert to geopolitical risks. The conflict has intensified with Hezbollah's rocket attacks on Israeli cities, prompting speculation about Israel's next moves.
Iran has issued stern warnings against any attacks on its oil infrastructure, indicating that such actions could alter its nuclear strategy. U.S. President Biden has advised Israel against targeting Iranian oil facilities, highlighting the delicate balance of power in the region.
While OPEC+ countries like Saudi Arabia and the UAE could increase production to mitigate potential losses from Iran, the current weak global demand for oil may restrict significant price increases. As the situation unfolds, market watchers are keeping a close eye on the geopolitical landscape, including natural disasters like Hurricane Milton, which could also impact crude oil inventories.
