Oil prices tumbled on Monday after Israel’s retaliatory attack on Iran over the weekend avoided hitting Tehran’s critical energy infrastructure.
Brent crude, the global oil benchmark sunk 5.8% by 5:34 a.m. ET to trade at $72 a barrel, while West Texas Intermediate, the US oil benchmark, dropped 6% to $67 a barrel.
Israel launched direct strikes on what it said were military targets in Iran early Saturday, in retaliation for the barrage of missiles Tehran launched into Israel earlier this month. The attack appears to have deliberately avoided hitting Iran’s oil fields and nuclear facilities.
Iran vowed on Sunday to respond to Israel’s strikes but said it does not want a wider war.
“The targeted scope of the attack and the absence of an immediate retaliation signal have seen markets price out some of the geopolitical risk premium (related to the conflict),” analysts at Deutsche Bank wrote in a note Monday.
Oil prices have climbed since Israel began targeting Hezbollah — an Iran-backed militant group based in Lebanon — in late September, and as Iran has retaliated by launching missiles into Israel.
Investors have grown increasingly concerned that the escalating conflict may disrupt oil flows through the vital Strait of Hormuz off Iran’s southern coast, which could send oil prices soaring. The slim waterway — just 21 miles (34 kilometers) wide at its narrowest point — is “the world’s most important oil transit chokepoint,” according to the US Energy Information Administration.
About one-fifth of the world’s global oil trade passes through the strait every day, according to Simone Tagliapietra, a senior fellow at Brussels-based think tank Bruegel.
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