Oil prices are anticipated to decline when trading resumes on Monday as Israel’s recent retaliatory strike on Iran did not target Tehran’s oil or nuclear infrastructure, thus avoiding disruptions to energy supplies, according to analysts.
Last week, Brent and U.S. West Texas Intermediate (WTI) crude futures rose by 4% amid volatile trading, reflecting market uncertainty surrounding Israel’s response to the Iranian missile attack on October 1 as well as the upcoming U.S. elections.
Israeli jets conducted three waves of strikes on Saturday against missile factories and military sites in western Iran, marking a significant escalation in the ongoing conflict between the two nations. Harry Tchilinguirian, head of research at Onyx remarked that the market can now “breathe a big sigh of relief,” as the uncertainty over Israel’s response to Iran has been clarified.
He noted that the timing of the attack, following U.S. Secretary of State Antony Blinken’s departure was advantageous for the U.S. administration especially with elections approaching. Iran downplayed the impact of Israel’s airstrikes, claiming they resulted in limited damage and emphasizing that the attacks did not target oil infrastructure.
Tony Sycamore, an IG market analyst, suggested that the lack of a robust Iranian response removes a key uncertainty from the market. He indicated that a “buy the rumor, sell the fact” reaction is likely when crude oil futures reopen, predicting that WTI prices may return to around $70 per barrel.
Tchilinguirian believes that the geopolitical risk premium previously built into oil prices will decrease rapidly with Brent crude potentially heading back towards the $74-$75 range. UBS commodity analyst Giovanni Staunovo also expects Monday’s price drop to be temporary, noting that the market likely did not fully account for a significant risk premium.
