Following a series of Israeli airstrikes on Iran, global crude oil prices experienced a significant spike, with analysts predicting further escalations in energy costs amid growing Middle Eastern tensions. The strikes, which occurred in the early hours of Friday, initially pushed crude oil prices up by as much as 3.5%, with oil benchmarks increasing over $3 a barrel in early trading sessions.
However, by noon GMT, prices had slightly retreated; Brent crude futures for June delivery were down by $0.50 at $86.63 per barrel, and the May contract for US West Texas Intermediate (WTI) decreased by $0.43, marking a 0.52% fall, to $82.30 per barrel. The fluctuations in oil prices are closely tied to ongoing geopolitical tensions and the potential risks to oil supply.
The Israeli attack targeted Iranian territory, a move confirmed by both a senior US official and Iranian state media, which also reported that air defenses were activated, and flights were halted in areas including Tehran and Isfahan. This military action is part of a continuing conflict between the two nations, with Iran recently launching a significant attack on Israel in retaliation for a suspected Israeli strike in Syria.
Iran, as the world’s seventh-largest oil producer and a major OPEC member, plays a critical role in global oil markets. Any potential threat to its oil production is likely to have widespread repercussions. Analysts, including Kelvin Wong from OANDA, Singapore, highlight the increased geopolitical risk premium which could lead to significant disruptions in oil supply and market stability in the short term.
Bank of America’s energy experts also cautioned earlier this week that an all-out war between Israel and Iran could severely disrupt Iranian crude supplies and potentially increase oil prices by $30-$40 per barrel. Such a scenario would also pose risks to shipping through the Strait of Hormuz, a vital route for around a fifth of the world’s oil supply. The situation remains fluid, with the international community closely monitoring developments that could impact global energy markets.
