Iran, an Opec member which exports about 1.7 million barrels of oil per day, has warned Israel of more “devastating” attacks if it responds to the missile barrage.
Helima Croft, an analyst at RBC Capital Markets and a former CIA analyst, said oil traders needed to assess whether Israel would retaliate by directly targeting critical Iranian military and economic assets, including energy infrastructure.
“In April, the Israelis opted for a muted response to the Iranian missile and drone strikes. And yet in the past two weeks the [government of Israeli Prime Minister Benjamin Netanyahu] has demonstrated an increasingly high-risk tolerance for escalatory actions to achieve their strategic objectives.”
Aside from its significance as a global oil exporter, Iran also borders the Strait of Hormuz, the narrow chokepoint through which Gulf oil and gas producers including Saudi Arabia, Qatar, Kuwait and the United Arab Emirates export energy, and has previously menaced vessels in the seaway.
Iran’s attack came as Israeli forces moved into Lebanon after days of bombardment, including a missile strike on Friday that killed the leader of Hezbollah, one of Tehran’s proxies in the region.
Oil prices are below the US$92 a barrel price hit after Hamas’ attack on Israel on October 7 last year, the trigger for almost 12 months of conflict.
After Iran’s attack on Israel passed with minimal damage reported, oil prices retreated from their intraday highs, with Brent settling up 2.5% at US$73.56 a barrel.
“This fresh escalation is serious and justifies oil’s jump,” said Bill Farren-Price, a veteran oil market watcher and senior research fellow at the Oxford Institute for Energy Studies.
“But we’ve been here before – the conflict needs to show signs of spreading to the Gulf if it is to ignite a broader and sustained oil price rally. At the moment it has not.”
A dip in oil prices over the past few months had resulted in a 5% fall in prices at the pump in New Zealand during September, according to Gaspy figures.
