Oil markets are bracing for a decline in prices when trading resumes Monday. Israel’s recent airstrikes on Iran, executed over the weekend, avoided Tehran’s oil infrastructure, calming fears of disruptions to energy supplies. Analysts anticipate that this move may drive oil prices downward, with Brent crude potentially stabilizing around $74-$75 per barrel.
Recent Gains Amid Uncertainty
Last week, Brent and U.S. West Texas Intermediate (WTI) crude futures climbed approximately 4% amid heightened volatility. Concerns were fueled by Israel’s anticipated response to an Iranian missile attack on October 1, as well as uncertainty ahead of the upcoming U.S. elections. However, with Israel’s strikes narrowly targeting missile factories and sites outside the primary oil regions, the market is reassessing the immediate risk.
Harry Tchilinguirian, head of research at Onyx, commented that the markets can now “breathe a big sigh of relief.” Israel’s measured response appears to have avoided escalation, creating a positive shift for oil market stability. “The known unknown that was Israel’s eventual response to Iran has been resolved,” Tchilinguirian noted.
Analysts Predict Oil Price Correction
With oil supply infrastructure untouched, IG market analyst Tony Sycamore expects oil prices may experience a “buy the rumour, sell the fact” reaction when the markets reopen. This could push WTI crude back toward $70 per barrel. “Israel’s not attacking oil infrastructure, and reports that Iran won’t respond to the strike remove an element of uncertainty,” Sycamore observed.
Tchilinguirian further projects that the geopolitical risk premium currently factored into oil prices may rapidly deflate, which could lead to Brent crude heading back towards the $74-$75 range. This easing of tension points to potential relief for oil markets that had been bracing for a larger impact.
Limited Market Impact Expected
UBS commodity analyst Giovanni Staunovo echoed a similar sentiment, indicating that Monday may bring temporary downward pressure on prices. While Staunovo acknowledges Israel’s restraint may lead to a small price dip, he suggests that the market had not significantly inflated a risk premium. “I would expect such a downside reaction to be only temporary,” Staunovo added, suggesting that the broader market could quickly absorb the news and stabilize.
Potential for Long-Term Price Stability
The recent strikes have opened a pathway to lower volatility in oil markets, at least for the short term. By avoiding critical energy infrastructure, Israel’s actions have reduced the potential for sustained price increases. This may allow crude oil prices to find a balanced range unless future escalations arise.
As the market reassesses its risk outlook, the coming week will be crucial in determining whether this reprieve in geopolitical tensions leads to sustained price correction or if further developments renew fears.
Stay informed with Investor Empires daily news.
Comments are closed, but trackbacks and pingbacks are open.