Crude oil prices have surged significantly due to heightened tensions between Iran and Israel. West Texas Intermediate (WTI) crude increased by 3.8%, closing at $70.76 per barrel, while Brent crude rose by 3.74% to $74.38 per barrel. The price spike followed reports of Iran preparing to launch a missile attack on Israel, raising concerns over potential oil supply disruptions in the region, a major hub for global oil production.
Analysts have emphasized the risk that these geopolitical tensions could pose to oil markets. Helima Croft, head of global commodity strategy at RBC Capital Markets, highlighted the possibility of Iranian oil supplies being at risk. Iran, which has ramped up production to over 3 million barrels per day, plays a crucial role in the global oil market. Any direct military engagement between Israel and Iran could jeopardize Iran’s oil output, potentially causing a ripple effect across the global energy market.
In parallel, the market was also influenced by other factors, including expectations of increased supply from OPEC+ members. A panel of ministers from the oil-producing group met on October 2 to review production levels, hinting at the possibility of higher output from countries like Libya to alleviate some supply concerns. Libya, whose oil production has been disrupted, may see a recovery after political changes within its central bank.
Meanwhile, Hezbollah, an Iran-backed militia group based in Lebanon, fired missiles at Tel Aviv, intensifying the regional conflict. Israel responded with ground raids into southern Lebanon, and the United States issued a stern warning to Iran about escalating the situation further. Clay Seigle, a political risk strategist, remarked that any Israeli retaliation targeting Iran’s oil infrastructure could reduce global supply by over 1 million barrels per day, exacerbating the current price volatility.
In addition to geopolitical risks, slower economic growth in China and concerns over global demand also weighed on the market. Despite these factors, the ongoing conflict between Israel and Iran remains the primary driver of recent price increases, leaving traders on edge as the situation continues to unfold.
