Iran Attacks Israel with Drones and Missiles, but Oil Prices Remain Stable

Oil prices avoided a sharp rise even after Iran, the main crude producer, attacked Israel with drones and missiles, threatening to escalate the conflict in the oil-rich Middle East.

On Tuesday, the world’s main oil contracts traded slightly higher. The price of European benchmark Brent North Sea crude rose 0.1 percent to $90.17 a barrel. West Texas Intermediate crude, the main oil contract traded in the United States, rose 0.3% to $85.66 a barrel.

This was after he retreated on Monday following an attack on Saturday night.

– Retaliation? –

Markets had been anticipating the impact of Iran’s actions with warnings issued before the attack, although it is unclear how much of a response was expected.

“The attack, previously announced, caused minor damage because the Israeli forces took and related to almost all the projects,” said Oli Hvalby, an analyst at SEB Bank.

Late Saturday and early Sunday, Iran launched more than 300 drones, cruise missiles and ballistic missiles at Israel causing only minor damage, including a military base in the south of the country.

Tamas Varga, an analyst at BVM Energy, said, “The market rejects any escalation in the crisis between Iran and Israel. It is believed that any Israeli retaliation will be measured, in part because of American and international pressure to prevent it. “

“Iran will also be careful that the situation does not deteriorate because they will want to continue the export of crude oil,” Varga told AFP.

US Treasury Secretary Janet Yellen spoke about the possibility of more sanctions on Iran, which has been subject to tough US sanctions since Washington unilaterally pulled out in 2018 from the historic deal that eased sanctions -bonds in exchange for curbing Iran’s nuclear program.

The sanctions led to a sharp decline in Iran’s oil revenues and further restrictions on trade, helping to deepen decades of hostility with the United States and Israel.

– Low supply? –

Iran still produces about 3.2 million barrels of oil per day, according to the International Energy Agency, which last year ranked as the world’s ninth largest crude oil producer.

“Israel can pressure its ally, the United States, to impose tougher sanctions on Iran,” Huvalby said: “A loss of between 500,000 and 1 million barrels per day could lead to the imposition of sanctions therefore involved, especially on the export of oil from Iran.

However, Iran’s daily production is expected to remain above the roughly 1.9 million barrels of oil it was producing in mid-2020, after US President Donald Trump then pulled out of the nuclear deal. .

Varga predicted that the additional oil capacity within OPEC “should be sufficient to mitigate the impact of any supply disruption” due to sanctions on Iran.

He said that this would be true as long as Saudi Arabia, the main oil producer, was not drawn into the conflict, and the Strait of Hormuz, the main sea line for transporting crude oil, remained open.

“Currently, the market believes that it is possible to avoid a dangerous conflict,” said Varga.