Oil prices fell by more than $3 a barrel on Monday following Israel’s retaliatory strikes against Iran over the weekend, which did not target Tehran’s oil and nuclear facilities and thus did not disrupt energy supplies. This development eased geopolitical tensions in the Middle East.
Both Brent and U.S. West Texas Intermediate crude futures opened at their lowest levels since October 1. By 0750 GMT, Brent crude was priced at $72.92 a barrel, down $3.13, or 4.1%, while WTI fell $3.15, or 4.4%, to $68.63 a barrel, according to Reuters.
Last week, the benchmarks gained 4% amid volatility as markets reacted to uncertainties regarding the extent of Israel’s military response to an Iranian missile attack on October 1, alongside upcoming U.S. elections.
Israeli jets carried out three waves of strikes before dawn on Saturday, targeting missile factories and other locations near Tehran and in western Iran, marking another escalation in the ongoing conflict between the two nations.
Analysts noted that the geopolitical risk premium in oil prices, which had increased due to expectations of Israel’s retaliatory actions, has now decreased.
“The more limited nature of the strikes, including avoiding oil infrastructure, have raised hopes for a de-escalatory pathway, which has seen the risk premium come off a few dollars a barrel.
“The market will be watching closely for confirmation Iran won’t counter attack in coming weeks, which could see the risk premium rise again,” a Sydney-based energy analyst at MST Marquee, Saul Kavonic said.
Commonwealth Bank of Australia analyst, Vivek Dhar anticipates that market focus will shift to the ceasefire talks between Israel and Hamas, which resumed over the weekend.
“Despite Israel’s choice of a low aggression response to Iran, we have doubts that Israel and Iran’s proxies (i.e. Hamas and Hezbollah) are on track for an enduring ceasefire,” he said.
In October, the Organization of the Petroleum Exporting Countries and their allies, a group known as OPEC+, maintained its current oil output policy, including plans to gradually increase production starting in December. The group is set to meet on December 1 for discussions leading up to a full OPEC+ meeting.
