Oil extends surge as Israel vows retaliation after Iran strike
Brent crude surpassed $74 per barrel amid escalating Middle East tensions, with investors wary of potential supply disruptions.
Oil rose for a second day after Iran fired about 200 ballistic missiles at Israel, drawing a vow of retaliation from Prime Minister Benjamin Netanyahu and raising the risks to crude supplies from the region.
Global benchmark Brent climbed above $74 a barrel, after briefly spiking more than 5% on Tuesday following the Iranian assault, which was preceded by a warning from the US. West Texas Intermediate advanced to near $71, although it also remained below the previous session’s peak.
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Crude’s advance reflects investors pricing in a renewed risk premium for the world’s most important commodity, given the Middle East accounts for about a third of global supplies. Haven assets, including bonds, gold and the US dollar, also climbed on the latest escalation of the conflict.
Although Israel and Iran have been facing off since the outbreak of the war in Gaza against Tehran-backed Hamas almost a year ago, previous spikes have been short-lived in the absence of actual interruptions to oil output. Iran pumped about 3.4 million barrels a day in August, according to OPEC.
While many participants have “faded the risk” of supply disruptions, energy infrastructure could become a target for either side, RBC Capital Markets LLC said in a note. Iran’s Kharg Island export facilities could be a target, and Tehran and its proxies could attack energy operations “to internationalize the cost if the current crisis devolves into an all-out war,” it said.
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Tensions in the Middle East have increased markedly after the killing of Hezbollah’s chief, Hassan Nasrallah, last week. Israel bombed the center of Beirut on Monday and its troops have begun what it called “targeted ground raids” in Lebanon. Hezbollah is also backed by Tehran.
After Tuesday’s missile salvo, Iran’s Foreign Minister Abbas Araghchi said that his country’s action was concluded unless Israel “decides to invite further retaliation,” according to a post on X. In Israel, Netanyahu said Iran had made a big mistake, “and it will pay for it.”
Iran and Israel exchanged attacks earlier this year, with Tehran firing a barrage of missiles and drones in April that was flagged in advance and caused little damage. It was followed a few days later by a limited, retaliatory Israeli strike against Iran. That week, oil ended more than 3% lower.
From here, any “sustained rally” in oil will be determined by whether Israel responds with a direct attack against Iran’s military, infrastructure or oil industry, ANZ Group Holdings analysts said in a note.
OPEC , meanwhile, is scheduled later Wednesday to hold an online meeting of a technical panel — the Joint Ministerial Monitoring Committee — to review global oil markets. The group is preparing to revive some of its idled production from December, after initially delaying that plan.
In the US, the American Petroleum Institute reported that nationwide crude inventories declined by 1.5 million barrels last week. That would be the third straight weekly drop if confirmed by official figures later Wednesday.
