Oil Prices Steady Amidst Iran-Israel Tensions: Market Speculation and Geopolitical Dynamics

Oil prices remained largely unaffected by Iran’s recent attack on Israel, as market speculation suggested the conflict would not significantly disrupt global oil supply.

Brent crude, the global benchmark, initially rose by a modest 0.7% to $91.05 per barrel before stabilizing. Iran launched over 300 missiles and drones towards Israel, marking the first direct strike from Iranian soil, albeit most projectiles were intercepted. The attack was retaliation for a prior strike in Syria that killed senior Iranian military figures.

Analysts from RBC Capital Markets noted that the situation could de-escalate if Israel refrains from retaliating, aligning with White House advice.

Despite tensions escalating in a region crucial for oil production, particularly following previous conflicts like the Hamas-Israel clash in October, Iran’s mission to the United Nations indicated a potential resolution, temporarily easing concerns of a broader conflict.

Recent incidents, such as Iran seizing the MSC Aries near the Strait of Hormuz, have raised shipping risks, adding to existing logistical disruptions.

Market activity surged following the attack, with significant trading volumes in both Brent and WTI crude oil futures, along with a rise in bullish options trading.

Tightening oil markets, exacerbated by geopolitical tensions, have led to increased energy costs, posing challenges for central banks combating inflation. OPEC emphasized the need for close monitoring to ensure market stability in its recent report.

Furthermore, bullish sentiment among money managers has strengthened, with net-long positions on both Brent and WTI reaching their highest levels since 2021, reflecting growing concerns over Middle East instability.