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- Written by Michael Race, Peter Hoskins, Nick Edser
- Business reporter, BBC News
image source, Getty Images
Oil prices fell on Monday following Iranian retaliatory attacks on Israel over the weekend.
Brent crude, the main benchmark for international oil prices, has fallen but is still trading near $90 a barrel.
Prices are already rising on hopes of Iranian action, with Brent crude nearing a six-month high last week.
Analysts said the market is focused on how the conflict will affect global supply chains.
Fluctuations in oil prices can cause ripple effects around the world, as countries rely heavily on primary products used to produce fuels such as gasoline and diesel. Fuel and energy prices have been a major driver of global cost of living increases over the past few years.
When Russia invaded Ukraine in 2022, Western countries imposed sanctions on Russia, one of the world’s major oil exporters, and oil prices soared to $120 per barrel due to supply concerns. This increase not only led to higher prices for pumps, but also countless other products as companies adjusted their prices to cover higher costs.
Analysts said Israel’s response to the attack would be key for global markets in the coming days and weeks.
Israeli Defense Minister Yoav Galant said the conflict with Iran is “not over yet.”
His comments came after Iran launched drones and missiles toward Israel over the weekend in retaliation for the April 1 attack on its consulate in the Syrian capital Damascus. Israel has not said it carried out the attack on the consulate, but it is widely believed to have been behind it.
Brent crude oil prices hit $92.18 a barrel last weekend, the highest since October, but fell to around $89.50 on Monday.
The price of gold, considered a safe investment during times of uncertainty, also fell.
Gold hit a record high of $2,431.29 an ounce on Friday, before falling to $2,332.97 an ounce on Monday.
Energy analyst Vandana Hari said the drop in oil prices “clearly shows that the oil market is not considering the need to price in further supply threats at this point.”
However, Peter McGuire of trading platform XM.com said he expects energy markets to be volatile, with oil prices likely to soar if Israel responds strongly to Iran’s moves.
But April Larousse, investment director at Insight Investments, said the market was “likely to trade sideways until we get more information.”
“Unfortunately, this situation in the Middle East has been going on for some time, and the longer geopolitical tensions persist, the more markets will take a wait-and-see approach, but I don’t think there will be anything like a panic reaction as a first move. ” she said on the BBC’s Today programme.
Asia-Pacific stock markets fell on Monday as investors weighed the impact of the attack. Britain’s FTSE 100 stock index also fell slightly.
Russ Mold, investment director at investment firm AJ Bell, said markets “started the week relatively calm.”
However, he said, “There continues to be some tension among investors.”
“The situation remains difficult, and beyond the geopolitical and humanitarian implications, further escalation of conflict in the Middle East could lead to soaring energy prices and undermine central banks’ cautious efforts to curb inflation,” he said. It could be,” he added.
According to the US Energy Information Administration, Iran is the world’s seventh largest oil producer and the third member of the OPEC oil producing cartel.
Analysts say a key question for future oil prices is whether shipping through the Strait of Hormuz will be affected.
The strait between Oman and Iran is an important shipping route through which approximately 20% of the world’s total oil supply passes.
OPEC members Saudi Arabia, Iran, the UAE, Kuwait and Iraq send most of their oil exports through the strait.
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