Oil prices fell on Monday as market participants reevaluated their risk premiums in the wake of Iran’s weekend attack on Israel, which the Israeli government said caused limited damage.
Brent crude oil, against which Nigerian oil is priced, dipped by 50 cents, or 0.5%, to $89.95 a barrel while West Texas Intermediate (WTI) oil fell by 52 cents, or 0.6%, to $85.14 a barrel.
The attack, involving over 300 missiles and drones, marked the first assault on Israel from another country in more than three decades. It heightened concerns over a potential broader regional conflict impacting oil traffic through the Middle East.
However, Israel’s Iron Dome defense system intercepted many of the missiles, and the attack resulted in only modest damage and no reported loss of life.
Warren Patterson, head of commodities strategy at ING, noted that the market had largely priced in the potential attack in the days leading up to it. The limited damage and the absence of casualties suggest that Israel’s response may be more measured, which could help stabilize the oil market.
Iran, a major oil producer within OPEC, currently produces over 3 million barrels per day (bpd) of crude oil. The potential risks include stricter enforcement of oil sanctions and the possibility of Israeli targeting of Iran’s energy infrastructure, according to ING.
Nevertheless, OPEC possesses over 5 million bpd of spare production capacity, which could help mitigate any supply disruptions.
Analysts from ANZ Research and Citi Research have suggested that further significant impact on oil prices would require a material disruption to supply, such as constraints on shipping in the Strait of Hormuz. So far, the Israel-Hamas conflict has not had a notable effect on oil supply.
The market remains watchful of Israel’s response to the attack, which could influence the future trajectory of oil prices and broader geopolitical tensions in the region.
