Business a.m.
Oil prices surged higher on Wednesday, building on the sharp gains recorded in the previous session, following Iran’s missile attack on Israel. The escalation of tensions and the potential for disruption to the volatile region’s crude output sparked a wave of buying in the oil market, sending prices soaring as investors rushed to secure their positions amidst the uncertainty.
The market sentiment was bullish on Wednesday morning as the U.S. crude futures jumped 2.1 percent to $71.27 a barrel while the Brent contract rose 1.7 percent to $74.97 a barrel.
The volatile oil market continued to soar as U.S. and Brent crude benchmarks posted gains of over five percent on Tuesday, following Iran’s unprecedented military strike against Israel, which came in retaliation for the recent killing of Iran-backed Hezbollah leader Hassan Nasrallah and Israel’s ground forces deployment in south Lebanon.
Amidst escalating tensions, Iran declared its attack had concluded, provided there is no further provocation, while Israel vowed to retaliate with vast destruction, potentially drawing the U.S., Israel’s staunch ally, into the volatile situation.
RBC Capital Markets analysts weighed in on the precarious state of the oil market, noting that despite the ongoing conflict, many market participants had largely discounted the risks of physical supply disruptions, particularly as Iranian exports had climbed to 1.7mb/d, reaching almost six-year highs.
RBC underscored that Iran has avoided replicating the 2019 attacks on regional energy infrastructure to date, yet cautioned that if the conflict degenerates into a full-blown war, Iran and its proxies might expand their attacks to energy operations in other parts of the region to ensure that the international community feels the cost of the crisis.
ING analysts also commented on the potential consequences of further escalation, stating that significant escalation between Iran and Israel would likely involve targeting Iranian nuclear facilities and energy infrastructure.
In the midst of this escalating conflict, the OPEC+ alliance, consisting of OPEC members and their allies, is set to hold a meeting to review the oil market situation.
With the group already committed to increasing production by 180,000 barrels per day each month, starting in December, analysts anticipate that little change is likely to be recommended at this meeting.
