U.S. crude oil jumps more than 3%, closes above $77 as market waits for Israel strike against Iran
On Monday, U.S. crude oil prices surged over 3% as the market anticipates a potential attack by Israel on Iran.
Last week, oil prices surged due to concerns that Israel might target Iran's oil sector in response to a missile attack from Tehran.
Last week, West Texas Intermediate, the key U.S. crude oil benchmark, experienced a significant increase of 9.09%, marking its highest weekly rise since March 2023. Similarly, the global benchmark Brent saw a notable jump of 8.43%, representing its largest weekly gain since January 2023.
Here are the energy prices at the end of trading on Monday:
On Friday, President Joe Biden advised Israel against targeting Iranian oil installations, following a nearly 5% increase in oil prices the previous day after he hinted that the U.S. was considering the option of an attack. Additionally, Biden has expressed his disapproval of Israel launching strikes on Iran’s nuclear sites.
Helima Croft, who leads global commodity strategy at RBC Capital Markets, noted that it's not yet known how Israel will respond. She stated that if Israel were to attack Kharg Island, it would greatly affect the oil market since that is the route for 90% of Iran's crude oil exports.
"We need to analyze what targets the Israelis have attacked and how Iran might respond," Croft explained during an interview on CNBC's "Worldwide Exchange" on Monday. "However, it's clear that we haven't been this close to a regional conflict in quite some time."
Currently, the market is only factoring in the chance that Israel will target Iran's oil infrastructure. However, Alan Gelder, the vice president of oil markets at Wood Mackenzie, explained on CNBC's "Squawk Box Europe" on Monday that this isn't the most dire situation we could face.
According to Gelder, the most concerning outcome would be a disturbance in the Strait of Hormuz, as it serves as a vital passage for 20% of the globe's crude oil exports. If Iran were to retaliate against an Israeli attack by focusing on this strait, it could lead to a significant spike in crude oil prices, the analyst warned.
The conflict between Israel and Hamas in Gaza has continued for a year, showing no signs of resolution. This situation has evolved into a broader, multi-front conflict in the Middle East. Israel is currently engaged in combat with Hezbollah in Lebanon and has targeted Houthi fighters in Yemen, responding to rocket attacks launched by these groups.
Hamas, Hezbollah, and the Houthis have formed alliances with Iran. Although the ongoing conflict in the Middle East hasn't yet affected oil supplies, experts are cautioning that the likelihood of disruption increases the longer the fighting persists.
