Oil prices plunged by nearly $5 per barrel on Monday after Israel’s weekend retaliatory strike against Iran avoided targeting oil and nuclear facilities, leaving energy supplies unaffected.
Both Brent and U.S. West Texas Intermediate (WTI) crude futures dropped to their lowest levels since October 1 at the market’s opening.
As of 1302 GMT, Brent had fallen by $4.80, or 6.31%, to $71.25 per barrel, while WTI declined by $4.78, or 6.7%, to $67.00 per barrel.
The benchmarks had gained 4% last week amid volatile trading, driven by market uncertainty over the upcoming U.S. election and anticipation of Israel’s response to Iran’s missile strike on October 1.
Israel’s attack on Iran and response
Dozens of Israeli jets carried out three waves of pre-dawn strikes on Saturday, targeting missile factories and other facilities near Tehran and in western Iran, marking the latest escalation between the two regional rivals.
The geopolitical risk premium that had previously driven up oil prices in anticipation of the attack eased following the operation.
- Iran will “use all available tools” in response to Israel’s weekend attack on military targets, Iranian Foreign Ministry spokesperson Esmaeil Baghaei stated on Monday. While Iran initially downplayed the impact of Saturday’s airstrikes, claiming only minor damage, U.S. President Joe Biden called for de-escalation amid fears of a broader conflict in the Middle East.
- On Sunday, Iran’s Supreme Leader Ayatollah Ali Khamenei urged officials to carefully assess how to showcase Iran’s power to Israel, warning that the attack should “neither be downplayed nor exaggerated.”
- The two nations, long-time adversaries, have engaged in retaliatory actions for months. Saturday’s strike followed an Iranian missile barrage on October 1, most of which Israel reported intercepting with its air defenses.
Iran also supports Hezbollah, currently involved in intense fighting with Israeli forces in Lebanon, and the Palestinian militant group Hamas, which continues to engage in conflict with Israel in the Gaza Strip.
Tensions in the Middle East
Tensions between Iran and Israel have escalated rapidly since the October 7, 2023, attack on Israel by Iran-backed Hamas, heightening fears of a broader regional conflict that could involve global powers and threaten global energy supplies.
- The situation has further intensified with worsening conflict in Lebanon, where Israel is conducting a vigorous campaign against Hezbollah, Iran’s key regional ally, to prevent rocket attacks on northern Israel.
- The United States, which had urged Israel to avoid targeting sensitive Iranian energy and nuclear sites, joined other nations in calling for an end to the escalating confrontation. However, Israeli Prime Minister Benjamin Netanyahu stated on Saturday that the targets in Iran were selected based on Israel’s national interests, independent of U.S. directives.
- President Joe Biden acknowledged that the strikes appeared to have focused solely on military targets and expressed hope that they would mark “the end” of the escalation.
