Oil markets, weighing the consequences of Iran’s first ever direct attack on Israel over the weekend, with missiles and drones, opened cautiously in early Asian trade Monday and will be shaped by the extent of Tel Aviv’s response.
First signs indicate that investors are relieved by the scope of Iran’s attack as it has been perceived as a controlled attack that is not expected to force Israel to escalate action and prompt a forceful response from the US and allies, which would certainly lead to a regional conflict.
In early Asian trading Monday morning, Brent crude oil futures were trading at a level of 90.50 dollars a barrel, marginally up compared to Friday, while WTI futures fell slightly to 85.57 dollars a barrel.
Over the past month, Brent prices have risen by 8.5 percent, in expectation of action by Iran. Though this ascent cannot be ignored, forecasts of a spike to levels of between 95 and 100 dollars a barrel have yet to be confirmed.
Worse-case scenarios entailing further escalation – which would consequently cut off oil supply from the region and, worse still, prompt Tehran to block the Strait of Hormuz, a highly important strategic location for international trade offering passage to a third of the world’s liquefied natural gas and almost 25 percent of total global oil consumption – still seem far off.
Markets have remained composed. Iran has tested reactions, while Israel’s ability to intercept and the support of its allies have both been confirmed.
This means that any oil price rises, as an initial reaction following Iran’s weekend attack, will be short-lived.
Iran launched drones and missiles at Israel over the weekend as retaliation for an attack on its consulate in the Syrian capital Damascus on April 1. Israel has not claimed responsibility for the consulate strike but is widely regarded to have been behind it.