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U.S. crude oil prices surged by more than 3% on Tuesday after Iran fired missiles at Israel, raising fears of a potential regional conflict in the Middle East. The attack sparked concerns over the security of oil supplies from the region, which plays a significant role in the global energy market.
Helima Croft, head of global commodity strategy at RBC Capital Markets, noted the potential risks associated with this conflict. She pointed out that how Israel responds to the attack, particularly if it targets Iran’s nuclear facilities or oil infrastructure, could have major implications. Iran is currently producing over 3 million barrels of oil per day, the highest in five years, and any disruption could have a significant impact on global supply.
Tuesday’s Oil Price Movements:
- West Texas Intermediate (WTI) Crude: November contracts rose to $70.76 per barrel, an increase of $2.59 or 3.8%.
- Brent Crude: December contracts reached $74.38 per barrel, up by $2.68 or 3.74%.
The missile attack was carried out by Iran’s Islamic Revolutionary Guard Corps, targeting military sites in Israel. While the Israel Defense Forces (IDF) managed to intercept many of the missiles, no immediate casualties were reported. IDF spokesperson Daniel Hagari confirmed the absence of additional aerial threats from Iran and allowed civilians to leave shelters. Hagari warned that the missile attack “will have consequences.”
A senior White House official reiterated U.S. support for Israel and cautioned Iran that any further aggression would result in “severe consequences.”
Tensions in the region have increased over the past week, with Israel conducting airstrikes against Iran-backed Hezbollah in Lebanon and deploying ground forces in the south. Market analysts have previously warned that an Israeli incursion into Lebanon could trigger a broader conflict involving Iran, thereby posing risks to crude oil supplies.
The impact on oil markets will depend on the extent of any potential Iranian attacks and how Israel responds. Bob McNally, president of Rapidan Energy, suggested that if the current exchanges resemble the missile strikes and restrained response seen in April, the crude risk premium may quickly dissipate. However, he cautioned that Israel’s recent stance of escalating responses to regional attacks could intensify the situation, potentially leading to higher geopolitical risk premiums in oil prices.