Oil prices are unstable due to the escalation of the conflict between Israel and Iran
Kyiv • UNN
After the escalation of the conflict between Israel and Iran, oil prices are rising again. Fears of supply disruptions through the Strait of Hormuz are putting pressure on the market.
Oil prices were volatile on Monday after rising 7% on Friday, amid renewed strikes by Israel and Iran over the weekend that heightened fears that the conflict could spread throughout the region and significantly disrupt oil exports from the Middle East, UNN writes, citing Reuters.
Details
Brent crude futures rose 64 cents, or 0.86%, to $74.87 a barrel by 05:07 GMT (08:07 Kyiv time), while WTI crude futures rose 76 cents, or 1.04%, to $73.74. Earlier in the session, they rose by more than $4 a barrel, and also briefly moved into negative territory.
Both brands rose in price by 7% on Friday, jumping by more than 13% during the session to the highest values since January.
Iranian missiles struck Israeli Tel Aviv and the port city of Haifa on Monday, destroying buildings and fueling fears among world leaders at this week's G7 meeting that the battle between the two old enemies could lead to a larger regional conflict.
The exchange of strikes between Israel and Iran on Sunday resulted in civilian casualties, and the military of both countries called on civilians on the opposite side to take precautions against further strikes.
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Recent events have raised concerns about disruptions in the Strait of Hormuz, a vital shipping route.
About a fifth of the world's oil consumption, or about 18-19 million barrels per day of oil, condensate and fuel, passes through the strait.
"The purchase was driven by the ongoing Israeli-Iranian conflict, the resolution of which is not in sight," said Toshitaka Tadzawa, an analyst at Fujitomi Securities.
"But as was seen last Friday, some sales arose due to fears of an overreaction," he said.
As markets monitor possible disruptions to Iranian oil production due to Israeli strikes on energy facilities, increased fears of a blockade of the Strait of Hormuz could sharply push prices up, Tadzawa added.
Iran, a member of the Organization of the Petroleum Exporting Countries (OPEC), currently produces about 3.3 million barrels per day and exports more than 2 million barrels per day of oil and fuel.
According to analysts and OPEC watchers, the spare capacity of OPEC and its allies, including Russia, to pump more oil to offset any disruptions is roughly equivalent to Iran's production.
"If Iranian crude oil exports are disrupted, Chinese refineries, the only buyers of Iranian barrels, will have to look for alternative grades from other Middle Eastern countries and Russian crude oil," said Richard Joswick, head of short-term oil analysis at S&P Global Commod.
"This could also increase freight rates and insurance premiums for tankers, narrow the Brent-Dubai spread and hurt refinery margins, especially in Asia," Joswick added.
US President Donald Trump said on Sunday that he hoped Israel and Iran could broker a ceasefire, but added that sometimes countries have to fight first. Trump said the US would continue to support Israel, but declined to say whether he would ask the US ally to suspend strikes on Iran.
German Chancellor Friedrich Merz said he hoped the meeting of "Group of Seven" leaders in Canada on Sunday would reach an agreement that would help resolve the conflict and prevent it from escalating.
Meanwhile, Iran told mediators Qatar and Oman that it was not ready for ceasefire talks while under attack by Israel, an official briefed on the talks told Reuters on Sunday.