Oil Prices Expected to Decline After Israel Shows Restraint in Strikes

 

Oil




Oil Prices Expected to Decline After Israel Shows Restraint in Strikes


Oil prices are projected to dip as trading resumes on Monday, following Israel’s restrained retaliatory strikes on Iran over the weekend. Analysts suggest that since Israel’s attacks avoided targeting Tehran’s oil and nuclear infrastructure, energy supplies remain unaffected.


Brent and West Texas Intermediate (WTI) crude futures both saw a 4% rise last week amidst volatile trading. Markets had been uncertain about Israel’s response to Iran’s missile attack on October 1 and the upcoming U.S. elections next month.


In the early hours of Saturday, Israeli jets launched three waves of strikes, targeting missile facilities and other locations near Tehran and western Iran. This marked the latest flare-up in the ongoing Middle Eastern conflict between the two rivals.


“The market can breathe a sigh of relief. The uncertainty around Israel’s response has now been resolved,” stated Harry Tchilinguirian, Head of Research at Onyx, via LinkedIn.


“Israel acted after U.S. Secretary of State Antony Blinken left the region, and the American administration couldn’t have hoped for a better outcome with less than two weeks to go before the U.S. elections.”


Iran downplayed the overnight Israeli airstrikes on its military targets, claiming only minor damage.


“Israel did not hit oil infrastructure, and reports that Iran won’t retaliate reduce uncertainty,” said Tony Sycamore, a market analyst at IG in Sydney. “We’re likely to see a ‘buy the rumor, sell the fact’ scenario when crude futures reopen tomorrow,” he added, predicting WTI could return to around $70 per barrel.


Tchilinguirian also expects the geopolitical risk premium built into oil prices to unwind quickly, potentially pushing Brent back down to $74-$75 per barrel.


UBS commodity analyst Giovanni Staunovo concurs, anticipating depressed oil prices on Monday due to Israel’s measured response. However, he warned that the decline might be short-lived as markets haven’t fully factored in a significant risk premium.


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