Oil Prices Remain Stable Despite Iran's Attack on Israel

Oil prices remain stable despite Iran's attack on Israel, as the market appears to have priced in the potential fallout, and diplomatic efforts aim to prevent further escalation.

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Muthana Al-Najjar
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Oil Prices Remain Stable Despite Iran's Attack on Israel

Oil Prices Remain Stable Despite Iran's Attack on Israel

Oil prices remained relatively stable on Monday, April 17, 2024, despite a novel drone and missile attack launched by Iran against Israel over the weekend. The West Texas Intermediate crude oil contract for May delivery fell slightly by 5 cents to settle at $85.36 a barrel, while the June Brent futures contract lost 8 cents to settle at $90.02 a barrel.

The muted response from the oil market came as a surprise to analysts, who had expected the attack to have a more significant impact on prices. However, the market appears to have already priced in the potential fallout from the assault, as warnings were given prior to the event.

U.S. Treasury Secretary Janet Yellen stated that the United States may impose additional sanctions on Iran's oil exports in response to the attack. The U.S. is already using financial sanctions to isolate Iran and disrupt its ability to fund proxy groups and support Russia's war in Ukraine.

Israel's wartime Cabinet met to discuss a potential response to the attack, with the Israeli army chief warning that Iran will face consequences. However, Israel is facing pressure from the U.S., Britain, and other allies to show restraint and avoid further escalation of the conflict.

Why this matters: The stability of oil prices despite the escalating tensions between Iran and Israel highlights the market's resilience and the effectiveness of diplomatic efforts to prevent a wider regional war. The situation remains delicate, and any further escalation could have significant implications for the global economy and energy markets.

While the scale of Israel's retaliation remains unclear, analysts believe that any response will be measured due to pressure from the international community. Iran is also unlikely to further escalate the situation, as it wants to continue its crude oil exports, which have been heavily impacted by U.S. sanctions.

The attack has raised concerns about potential supply disruptions, particularly if Saudi Arabia gets drawn into the conflict or the Strait of Hormuz is closed. However, the market currently believes that further serious escalation is avoidable, and OPEC's spare capacity should be sufficient to mitigate any supply disruptions caused by Iran.

Key Takeaways

  • Oil prices remained stable despite Iran's attack on Israel, surprising analysts.
  • U.S. may impose new sanctions on Iran's oil exports in response to the attack.
  • Israel faces pressure from allies to show restraint and avoid further escalation.
  • The market believes serious escalation is avoidable, and OPEC can mitigate supply disruptions.
  • The stability of oil prices highlights the market's resilience and diplomatic efforts to prevent wider conflict.