Oil prices are anticipated to rise on Monday as market participants react to Iran’s attack on Israel over the weekend, which heightened geopolitical tensions in the Middle East. Analysts noted on Sunday that potential retaliatory actions by Israel and Western allies could drive oil prices even higher.
Iran launched explosive drones and missiles at Israel on Saturday in retaliation for a suspected Israeli attack on its consulate in Syria on April 1. The direct attack on Israeli territory marks a significant escalation and has raised fears of a broader regional conflict.
As concerns mount, global benchmark Brent crude closed on Friday at $90.45 per barrel, its highest level since October. U.S. West Texas Intermediate crude settled at $85.66, reflecting investor nervousness over potential disruptions in the region. Trading was closed on Sunday.
Analysts expect oil prices to strengthen when trading resumes on Monday, but caution that the extent and duration of any rally will depend on potential supply disruptions and the response from Israel and Western nations.
U.S. President Joe Biden announced he would convene a meeting with leaders of the Group of Seven major economies on Sunday to discuss a coordinated diplomatic response to the Iranian attack.
“Oil prices might spike at the opening as this is the first time Iran has struck Israel from its territory,” said UBS analyst Giovanni Staunovo. He added that the duration of any price increase would be determined by Israel’s response and the G7’s decisions regarding potential sanctions on Iranian crude exports.
Iran’s oil exports have seen a significant uptick under the Biden administration, reversing the severe reductions imposed during Donald Trump’s presidency. Any changes to Iran’s oil exports could affect global oil markets and impact U.S. gasoline prices, a politically sensitive issue ahead of the upcoming elections.
Attention will also be on potential disruptions to shipping through the Strait of Hormuz, a key passageway for global oil trade that sees about a fifth of the world’s total daily oil consumption. Earlier reports indicated Iran’s Revolutionary Guard boarded and seized a vessel in the region, raising further concerns.
Saxo Bank’s Ole Hansen stated that while crude prices already factor in some risk premium, the extent to which it widens will hinge on developments near Iran, particularly around the Strait of Hormuz.
The situation remains fluid, and market participants are closely monitoring the evolving geopolitical landscape for any signs of escalation or resolution.
