Oil prices hit their highest level in over a month on Thursday, driven by speculation that Israel may launch retaliatory strikes against Iran’s oil industry. Brent crude rose by more than 5%, settling at $77.62 per barrel, following comments from U.S. President Joe Biden about the possibility of such actions in response to a missile attack on Israel by Iran earlier in the week. The increase continued on Friday, with Brent rising 1.6% to $78.85.
When asked whether the U.S. would support Israel in targeting Iran’s oil facilities, Biden confirmed, “We’re in discussion of that,” but did not elaborate. Senior U.S. officials have been in talks with top Israeli officials, aiming to limit Israel’s response and prevent further escalation in the region.
U.S. officials believe Israel’s retaliation will be measured to avoid triggering additional conflict across the Middle East. One official noted that Israeli leaders want to send a strong message to Iran while maintaining control over the situation. However, they emphasized that no final decisions had been made.
This cautious outlook comes as Biden and Western allies have publicly opposed any strikes on Iranian nuclear facilities. On Thursday, leaders of the G7 urged both Israel and Iran to avoid “uncontrollable escalation” in a joint statement. They warned that a dangerous cycle of attacks could harm everyone involved and called for responsible actions and constructive engagement to de-escalate tensions.
U.S. and Israeli officials are discussing potential strikes on military targets and energy infrastructure. However, Washington does not expect to participate directly in any attacks. Concerns are growing among U.S. allies about America’s ability to influence the Israeli government, led by Prime Minister Benjamin Netanyahu. One European diplomat stated that Israel had been urged to refrain from attacking Iran’s oil or nuclear facilities, but there are no guarantees.
Another senior EU diplomat expressed frustration, saying, “It’s depressing to see how little influence we have on these events.” Biden recently affirmed that the U.S. does not have a veto over Israel’s actions but added that no immediate response from Israel was expected. “We don’t ‘allow’ Israel. We advise Israel. And there’s nothing going to happen today,” he stated.
Biden’s remarks come as fears of an expanding conflict grow. Israel has initiated a ground invasion of Lebanon, following weeks of intense bombing and ongoing warfare in Gaza. In retaliation for Iran-backed Hezbollah’s attacks and the killing of its leader Hassan Nasrallah, Iran fired nearly 200 ballistic missiles at Israel on Tuesday.
On Thursday, Israel launched airstrikes on Beirut, targeting a Hezbollah-linked medical facility and killing at least nine people, including individuals in a media office used by the group.
The U.S. has aimed to broker ceasefire agreements between Israel and Hamas to end the war in Gaza, and it has recently sought a truce with Lebanon. However, those efforts have faltered. Kurt Campbell, Deputy U.S. Secretary of State, acknowledged “moments of surprise” in U.S.-Israel relations but highlighted ongoing communication to ensure mutual understanding.
West Texas Intermediate, the U.S. oil benchmark, also rose after Biden’s comments, settling at $73.71 on Thursday, up 5.2%, and climbing to $74.84 on Friday. Iran exports around 1.6-1.8 million barrels per day of crude and condensate, with the majority going to China.
Amrita Sen, Director of Research at Energy Aspects, warned that oil prices could “spiral higher” if Israel strikes Iranian refineries, prompting Tehran to retaliate against other oil facilities in the region. The global oil market has experienced volatility this week due to rising tensions, raising concerns about potential disruptions to energy exports. However, decreased demand from China and the availability of over 5 million barrels per day of spare capacity among OPEC+ producers have tempered market reactions.
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