Oil prices surge amid escalating Israel-Iran conflict
The global oil market is witnessing a significant surge in prices for the second consecutive day, following Iran's launch of 200 ballistic missiles at Israel. This military action has drawn a vow of retaliation from Israeli PM Benjamin Netanyahu, further escalating tensions in the region. The rising conflict has led to concerns over potential disruptions to crude supplies, causing Brent crude to rise 3.3% to nearly $76 per barrel and West Texas Intermediate to $72.30 per barrel, up by 3.5%.
Middle East conflict impacts global oil supplies
The ongoing conflict in the Middle East, a region responsible for nearly one-third of the world's oil supply, is causing investors to factor in an increased risk premium for crude. This has led to a rise in the value of safe-haven assets such as bonds, gold, and the US dollar. Despite previous price spikes being short-lived due to no actual disruptions in oil production, RBC Capital Markets LLC warns that energy infrastructure could become a potential target amid escalating tensions.
Iran's oil production and potential targets
As per OPEC data, Iran was producing about 3.4 million barrels of oil daily in August. RBC Capital Markets LLC has highlighted that Iran's Kharg Island export facilities could be targeted in the conflict. The firm also suggested that Tehran and its allies might attack energy operations "to internationalize the cost if the current crisis devolves into an all-out war."
Escalating tensions and potential impact on oil prices
The assassination of Hezbollah's leader, Hassan Nasrallah, last week has further intensified tensions in the Middle East. Following Iran's missile attack, Foreign Minister Abbas Araghchi stated that Iran's action was over unless Israel "decides to invite further retaliation." In response, Netanyahu declared that Iran had made a big mistake and "it will pay for it." Analysts from ANZ Group Holdings suggest that any sustained increase in oil prices will depend on how Israel responds to this latest move.
OPEC+ to review global oil markets amid conflict
Amid the escalating conflict, OPEC+ is set to hold an online meeting of a technical panel — the Joint Ministerial Monitoring Committee — to assess global oil markets. The group is preparing to revive some of its idled production from December. In the US, data from the American Petroleum Institute shows that nationwide crude inventories fell by 1.5 million barrels last week, marking the third consecutive weekly drop if confirmed by official figures later today.
