On Monday, U.S. crude oil prices increased by more than 3% as the market anticipates potential military actions by Israel against Iran.
Last week, oil prices rose sharply due to fears that Israel might target Iran’s oil sector in response to a ballistic missile attack from Tehran.
The U.S. benchmark West Texas Intermediate (WTI) saw a significant rise of 9.09% last week, marking its largest weekly increase since March 2023. Meanwhile, the global benchmark, Brent crude, climbed 8.43%, its biggest weekly gain since January 2023.
Here are the closing energy prices from Monday:
West Texas Intermediate
November contract: $77.14 per barrel, up $2.76 (3.71%). Year-to-date, U.S. crude oil has risen over 7%.
Brent Crude
December contract: $80.93 per barrel, up $2.88 (3.69%). Year-to-date, the global benchmark is up about 5%.
RBOB Gasoline
November contract: $2.1538 per gallon, up 2.77%. Year-to-date, gasoline prices have increased by more than 2%.
Natural Gas
November contract: $2.746 per thousand cubic feet, down 3.78%. Year-to-date, natural gas is up more than 9%.
President Joe Biden urged Israel on Friday not to strike Iranian oil facilities. This followed a 5% price spike a day earlier when he indicated that the U.S. was considering such military action. Biden has also expressed opposition to Israel attacking Iran’s nuclear sites.
The exact nature of any Israeli retaliation remains uncertain, according to Helima Croft, head of global commodity strategy at RBC Capital Markets. She noted that if Israel were to target Kharg Island—critical for Iran’s crude exports—the impact on the oil market would be substantial.
“We really need to see what Israel hits and how Iran responds,” Croft told CNBC’s “Worldwide Exchange” on Monday. “But we are certainly closer to a regional war than we have been in a long time.”
The current market is factoring in the possibility of Israel striking Iran’s oil infrastructure, but this is not the most severe scenario, Alan Gelder, vice president of oil markets at Wood Mackenzie, stated on CNBC’s “Squawk Box Europe.”
Gelder warned that the worst-case scenario would involve disruptions in the Strait of Hormuz, a crucial passage for 20% of the world’s crude exports. Iran could retaliate by targeting this strait in response to an Israeli strike, leading to a far more dramatic impact on crude prices.
The conflict between Israel and Hamas in Gaza has been ongoing for a year, escalating into a broader regional confrontation. Israel is also engaged in hostilities with Hezbollah in Lebanon and has attacked Houthi militants in Yemen in retaliation for rocket strikes from these groups.
Hamas, Hezbollah, and the Houthis are aligned with Iran. So far, the conflict has not disrupted crude oil supplies, but analysts warn that the risk of disruption is increasing as the conflict persists.
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