Oil prices fell off multi-month highs hit earlier yesterday as Israeli air strikes avoided Iranian oil sites, but prices still up about 6 per cent as investors worried that the tensions could disrupt Middle East oil supplies.
Brent crude futures were up $4.11, or 5.9pc, to $73.47 a barrel yesterday evening, after earlier soaring over 13pc to an intraday high of $78.50, the strongest level since January 27.
US West Texas Intermediate crude was up $4.38, or 6.4pc, at $72.42, after earlier jumping over 14pc to its highest since January 21 at $77.62.
Yesterday’s gains were the largest intraday moves for both contracts since 2022 after Russia invaded Ukraine, causing energy prices to spike.
Israel said it targeted Iran’s nuclear facilities, ballistic missile factories and military commanders yesterday at the start of what it warned would be a prolonged operation to prevent Tehran from building an atomic weapon.
“This has elevated geopolitical uncertainty significantly and requires the oil market to price in a larger risk premium for any potential supply disruptions,” ING analysts led by Warren Patterson said in a note.
Several oil traders in Singapore said it was still too early to say if the strike will affect Middle East oil shipments as it will depend on how Iran retaliates and if the US will intervene.
“It’s too early to tell but I think the market is worried about shutting off of the Strait of Hormuz,” one of the traders said.
MST Marquee senior energy analyst Saul Kavonic said the conflict would need to escalate to the point of Iranian retaliation on oil infrastructure in the region before oil supply is materially impacted.
He added that Iran could hinder up to 20 million barrels per day of oil supply via attacks on infrastructure or limiting passage through the Strait of Hormuz, in an extreme scenario.
On Wednesday afternoon, crude futures surged more than 4pc after the US ordered the evacuation of non-essential embassy personnel from Iraq, amid rising regional threats.
Supply concerns also mounted this week after President Trump indicated during a podcast that he’s increasingly doubtful Washington will reach a nuclear deal with Iran, as recent talks have stalled.
“I don’t know. I did think so, and I’m getting ... less confident about it,” Trump said on the programme ‘Pod Force One,’ which aired on Wednesday.
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