Oil Plunges as Israel Limits Iran Strike to Military Targets
Oil tumbled more than 6% at the start of the week after Israeli strikes against targets in Iran avoided the OPEC member’s crude facilities, raising the prospect for easing hostilities in the region.
Brent fell below $72 a barrel and West Texas Intermediate was near $68. Israeli jets struck military targets across Iran on Saturday, delivering on a vow to retaliate for a missile barrage at the start of the month, though the attack was more restrained than expected.
The strike avoided oil, nuclear and civilian infrastructure, in line with a request from US President Joe Biden’s administration.
There were signs of the market’s political risk premium fading across the board. In addition to falling prices, bullish options contracts were no longer trading at premiums to bearish ones, as they had done since the aftermath of the Iranian missile attack. Citigroup Inc. cut its Brent price forecasts, citing lower risks from the conflict in the Middle East.
Iran’s state media said that the country’s oil facilities were working normally, though the country’s foreign ministry said the nature of its response will correspond to the type of attack carried out.
Iran’s missile attack on Oct. 1 restored a war premium to oil that at times pushed the global Brent benchmark above $80 a barrel earlier this month. Still, prices are almost $20 lower than the first session after the Oct. 7 attack that sparked the conflict last year, as lackluster Chinese demand and expectations of oversupply early next year has pressured prices in recent months.
Brent for December settlement tumbled 6.2% to $71.37 a barrel at 9:55 a.m. in London, after plunging as much as 5.3% earlier. WTI for December delivery declined 6.4% to $67.22 a barrel.
Source: Bloomberg
