Asia’s Oil Prices Decline Following Iran’s Attack on Israel
Oil Prices Fall in Asia as Risk Premiums Decrease
Oil prices dropped at Asia’s open on Monday after Iran’s attack on Israel, causing limited damage according to the Israeli government. The futures for June delivery fell by 24 cents to $90.21 a barrel, while West Texas Intermediate (WTI) futures for May delivery were down by 38 cents at $85.28 a barrel by 1256 GMT.
Concerns Emerge After Iran’s Attack on Israel
An attack involving more than 300 missiles and drones on Israel raised concerns about a broader regional conflict affecting oil traffic through the Middle East. However, the attack, which Iran claimed was retaliation for an air strike on its Damascus consulate, resulted in only modest damage as Israel’s defence system intercepted the missiles.
Global Response to the Situation
While Israeli officials considered retaliation, the U.S. stated it would not participate in any offensive against Iran. Global powers, other Arab nations, and the UN secretary general called for restraint in the midst of escalating tensions.
Analyst Insights on the Situation
Analysts observed that the Iranian attack on Israel was significant but not severe enough to escalate hostilities further. Oil benchmarks had risen in anticipation of a retaliatory attack by Iran, reaching their highest levels since October. However, prices ended the week slightly down after the International Energy Agency lowered its forecast for oil demand growth this year.
Impact on Oil Supply and Prices
The conflict between Israel and Hamas has had minimal impact on oil supply so far. Despite the limited damage in Israel, analysts anticipated a temporary price rally. A potential disruption to supply, such as shipping constraints in the Strait of Hormuz near Iran, could lead to more significant and lasting effects on oil prices.
Uncertainties and Future Outlook
The path to Fed rate cuts remains uncertain due to persistent U.S. inflation, affecting oil prices. However, ongoing geopolitical instability in the Middle East and Europe suggests that risks lean towards upward price movements in the medium term, possibly reaching $90.
