Oil market volatility spiked after reports emerged that Israel may be preparing a strike on Iranian nuclear facilities. CNN, citing U.S. intelligence sources, reported that Israel is evaluating military options, sending oil prices sharply higher on Monday.
Price Reaction and Market Response
West Texas Intermediate (WTI) crude rose by as much as 3.5%, briefly surpassing $64 a barrel, before easing slightly. Brent crude also gained, reaching $66.14 per barrel. Investors reacted swiftly to the news, which overshadowed earlier expectations of a supply surplus in the second half of the year.
The oil market had already been jittery due to ongoing uncertainty over Iran-U.S. nuclear talks. A potential Israeli attack could derail any diplomatic progress and further destabilize the Middle East, a region that supplies around one-third of global crude oil.
Read: Israeli Protesters Block Aid Crossing to Gaza Amid Ongoing Conflict
Analysts Weigh In
Analysts pointed out that the market’s limited reaction might signal skepticism about the likelihood or impact of an attack. Bjarne Schieldrop, chief commodities analyst at SEB AB, said the modest price spike shows either the market doubts an attack will happen or believes its impact on oil supplies would be limited.
Tensions Rise Amid Nuclear Standoff
Iran’s Supreme Leader Ayatollah Ali Khamenei recently dismissed the likelihood of successful negotiations with the U.S., fueling additional concern. According to Bloomberg Intelligence, lifting sanctions on Iran could cause oil prices to fall to $40 a barrel, but a conflict would push them higher.
Goldman Sachs estimates Iran has increased oil output by one million barrels per day in recent years. A sudden disruption to that flow could raise crude prices by as much as $8 per barrel.
Broader Market Effects
The geopolitical risk also boosted traditional safe-haven currencies like the Swiss franc and Japanese yen. With OPEC expected to ease production limits and U.S. shale capacity still expanding, the market remains in flux.
For now, all eyes are on the Middle East as oil traders brace for further developments.
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