Brent and U.S. West Texas Intermediate (WTI) crude futures experienced a 4% increase last week amid fluctuating market conditions, as investors weighed the uncertainty surrounding Israel’s response to the Iranian missile attack on October 1, along with the upcoming U.S. elections.
Israeli jets carried out three waves of strikes early Saturday morning against missile factories and other targets in western Iran and near Tehran, marking another escalation in the ongoing tensions between these Middle Eastern rivals.
Harry Tchilinguirian, head of research at Onyx, commented on LinkedIn that the market can now “breathe a big sigh of relief,” as the uncertainty regarding Israel’s actions has been clarified. He noted that the strikes occurred after U.S. Secretary of State Antony Blinken’s visit, presenting a favorable scenario for the U.S. administration with elections just two weeks away.
Market analyst Tony Sycamore from IG in Sydney pointed out that Israel’s decision not to target oil infrastructure, combined with reports suggesting Iran will refrain from retaliating, has reduced uncertainty. He predicted that there may be a “buy the rumor, sell the fact” reaction when crude oil futures trading resumes, with WTI potentially dropping back to around $70 a barrel.
Tchilinguirian also anticipates a rapid deflation of the geopolitical risk premium previously factored into oil prices, expecting Brent crude to fall toward the $74-$75 range. UBS commodity analyst Giovanni Staunovo echoed this sentiment, predicting a decline in oil prices on Monday due to Israel’s measured response. However, he believes any decrease is likely to be short-lived, as the market had not fully accounted for a significant risk premium.
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