Apr 19 2024: Oil prices experienced a significant surge on Friday following reports of an Israeli attack on Iran, sparking concerns about potential disruptions in Middle East oil supply and roiling markets.
Benchmark contracts saw a more than $3 increase before slightly easing. At 0615 GMT, Brent futures rose by $1.40, or 1.61%, to $88.51 a barrel. Meanwhile, the most active U.S. West Texas Intermediate contract climbed $1.38, or 1.68%, reaching $83.48 per barrel.
Sources informed Reuters about Israel’s attack on Iranian soil on Friday, marking the latest exchange in tensions between the two countries. This situation raises the specter of deeper conflict in the region.
While Iranian media reported explosions, an Iranian official clarified to Reuters that these were caused by air defense systems. Additionally, state media mentioned that three drones over Isfahan were shot down.
Kelvin Wong, an analyst at OANDA in Singapore, noted that the rising geopolitical risk premiums create a risk-off environment, particularly with concerns about potential oil supply disruptions in the short term.
Jun Rong Yeap, a market strategist at IG in Singapore, highlighted the possibility of prolonged tit-for-tat retaliation between Israel and Iran, which could extend the period of heightened risk and support oil prices.
The recent events follow last weekend’s retaliatory strike by Iran, involving hundreds of drones and missiles after a suspected Israeli strike in Syria. While most of these projectiles were intercepted before reaching Israeli territory, the situation has intensified regional tensions.
Investors have been closely monitoring Israel’s response to the April 13 Iranian drone attacks. The geopolitical risk premium had been decreasing earlier in the week amid expectations that any Israeli retaliation would be tempered by international pressure.
In addition to these developments, Venezuela lost a crucial U.S. license for exporting oil globally. The U.S. also imposed sanctions on Iran, excluding its oil industry, in response to the country’s drone strike on Israel. These factors contribute to the heightened uncertainty surrounding global crude oil supply.