Israel-Iran escalation sparks oil prices surge over 7%, markets brace for supply shock; Hormuz chokepoint back in spotlight
Oil prices spiked more than 7% on Friday as a sharp escalation between Israel and Iran unnerved global energy markets. With fears mounting over potential supply disruptions, both Brent and US crude benchmarks climbed to levels not seen since January.
By mid-morning in London, Brent crude was up $5.10, or 7.4%, at $74.46 a barrel, after earlier touching $78.50. US West Texas Intermediate rose to $73.15, also gaining $5.10, or 7.5%, after hitting a peak of $77.62, reported Reuters.
These gains marked the steepest single-day jumps for both contracts since early 2022, when Russia's invasion of Ukraine triggered global price shocks.
Israel launched what it described as an extensive military operation against Iranian nuclear and missile infrastructure, stating the aim was to halt Tehran's nuclear ambitions.
Iran confirmed damage at its Natanz nuclear facility but said no radioactive contamination had occurred.
The oil market's immediate concern is the Strait of Hormuz, a critical maritime passage for around 20% of the world's oil supply. While no disruptions have been reported, analysts say the risk of escalation makes the situation volatile.
'The potential for spill over is real, but so far flows remain intact,' said Ole Hvalbye of SEB.
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'The market is watching closely.'
JPMorgan warned in a note that if the strait were to be blocked or oil infrastructure in the region were targeted, prices could skyrocket to as high as $130 a barrel—nearly double current forecasts.
Barclays noted that despite the price surge, the market hasn't yet priced in any actual drop in Iranian output. Most of Iran's crude exports head to China, putting those volumes at particular risk if tensions escalate further.
OPEC+'s spare production capacity could help cushion any supply shortfall, said Janiv Shah of Rystad Energy.
US Secretary of State Marco Rubio distanced Washington from Israel's actions, calling the strikes unilateral and urging Iran not to retaliate against American interests in the region.
Broader financial markets reflected investor anxiety. Stocks retreated, while safe haven assets such as gold and the Swiss franc saw inflows.
'The big unknown is whether Iran limits its response to Israel or widens the conflict,' said Helima Croft of RBC Capital Markets. 'Targeting military or economic assets beyond Israel could deepen the regional fallout.'
While crude markets remain elevated heading into the weekend, analysts are divided on how long the rally will last, with much hinging on whether the conflict expands or remains contained.
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Business Standard
41 minutes ago
- Business Standard
Iran launches hundreds of ballistic missiles on Israel as conflict widens
Iran fired hundreds of ballistic missiles against Israel following an unprecedented direct attack on its nuclear facilities, ramping up a conflict between sworn enemies that threatens to engulf the Middle East and disrupt global oil supplies. Multiple waves of missiles targeting Israeli cities amount to the most forceful step yet by Tehran since Israel's overnight raids killed top Iranian generals and badly damaged key military infrastructure. Israel said it identified missiles launched from the Islamic Republic and reported explosions from interceptions and falling debris from incoming projectiles. There was dramatic video footage of at least one large explosion in Tel Aviv, and reports of explosions over Jerusalem. The extent to which Israel's air defenses were pierced remains to be seen, with US forces helping to intercept and shoot down Iranian attacks. Markets took another hit from the surge in tensions: The S&P 500 lost over 1 per cent, wiping out this week's advance. West Texas Intermediate crude futures surged more than 7 per cent, the most since March 2022. Gold and the dollar rose. When the pair targeted each other last year, there was a greater time lag and a sense that after an exchange of fire, there would be a détente. This time, Israel has indicated this is an operation that could last weeks. This poses an existential problem for Iran, and a question of whether it can match its fiery rhetoric with actions. Israel has dramatically exposed its weaknesses, decimated its proxies and taken out key leaders. Additional escalations — particularly any targeting of American military or diplomatic facilities in the region — could rally domestic political support, but could dramatically intensify the conflict. It was unclear if Tehran was entertaining last-resort options such as blocking the Strait of Hormuz, one of the world's most vital oil arteries, in a scenario that investors fear the most. Iran's Supreme Leader Ayatollah Ali Khamenei vowed to 'act forcefully' in a pre-recorded video message carried by state TV. His statement was released after Iran started its retaliation. Unlike previous responses, this one came much faster. Given Israeli Prime Minister Benjamin Netanyahu has followed through on his long-promised threat to dismantle Iran's nuclear program, Iran was feeling the pressure to find a commensurate answer. So far, Israel has chosen to keep the US out of the conflict — a decision that an analysis by Bloomberg Economics suggested was the most likely since Tehran can't afford to go to war with the world's biggest economy and mightiest military. The backdrop are indirect nuclear talks between the Islamic Republic and the US, with a sixth round of negotiations scheduled to take place on Sunday. But the damage to its standing in the region is real. The head of the Islamic Revolutionary Guard Corps, Hossein Salami, and the military's chief of staff, Mohammad Bagheri, were both killed in Israeli strikes. At least two other senior IRGC members also died and several nuclear facilities were targeted. Iran informed the International Atomic Energy Agency that Israel struck the nuclear sites at Fordow and Isfahan as part of its wave of attacks in the last 24 hours, Director General Rafael Mariano Grossi told the UN Security Council on Friday. Grossi said the IAEA doesn't have information beyond indications that military activity took place around those facilities. But the move is important — if the facility at Isfahan is disabled, it would seriously crimp Iran's ability to enrich uranium in large volumes. Israel 'should not think that it is over. We won't allow them to escape unscathed from this great crime they have committed,' Khamenei said. But the Iranian supreme leader's terse statement shows Iran is probably not prepared to make any concessions. Iran's Foreign Minister Abbas Araghchi said Friday's attacks have derailed diplomacy. Meanwhile, with the Group of Seven leaders gathering in the Canadian Rockies, the attention will focus on how US President Donald Trump will react — or not. Going into the summit, there was a common desire to keep fraught geopolitical issues off the table but that will be difficult to do given the knock-on effects of a spike in oil prices on inflation and energy exports. Given the region is such a big crossroads for shipping of not just oil but consumer goods, any all-out war will further strain a global trading system disrupted by the trade wars. For his part, Trump gave brief telephone interviews to a smattering of journalists, particularly those from cable news networks, but otherwise didn't take to the cameras to make public remarks. The White House said Trump was not expected to emerge Friday night, though he could always turn to social media or additional interviews with the media. On Saturday, Trump's 79th birthday, he's scheduled to host a military parade ostensibly to celebrate the US Army's 250th year. He took to social media to warn Iran to make a deal 'before it is too late.' Come Saturday, the extent of the damage on both sides will come into focus. Israel said more than 200 aircraft participated in the operation that targeted around 100 locations across Iran. At least 95 people were wounded and several residential buildings in Tehran's suburbs were hit, according to Iranian media. Iran's ambassador to the United Nations said 78 people were killed in the attacks. One woman was killed in the Tel Aviv area, a police spokesman in Israel said. Netanyahu and Trump spoke by phone Friday to discuss the conflict, according to a White House official. The US has said it did not play a role in Israel's initial volley, and warned Iran against retaliation against American service members. The US role assisting Israel's aerial defense is customary, but what it does next will be critical.
Mint
an hour ago
- Mint
War upends the oil trade. How it could play out.
Israel's attack on Iran early Friday sent shock waves through the oil market, which relies on the region for one-third of global supplies. The reverberations won't go away soon. Oil prices spiked 14% in the immediate aftermath of the attacks, before giving back some of those gains. Brent crude, the international benchmark oil price, rose 7% on Friday to $74.23 per barrel. Based on recent history, oil's rise might seem fleeting. For most of the past three years—since the early days of the Russia-Ukraine war—geopolitical events haven't had a lasting impact on oil prices. The Israel-Hamas war and continuing violence in Ukraine have barely impacted the oil market, because they didn't dramatically affect supply and demand. But the price shock from the Israel-Iran conflict could last weeks because major oil infrastructure could be in the line of fire. 'It is something that seems like prices could remain elevated for some time," says Rob Haworth, who oversees investment strategy for U.S. Bank Asset Management Group. If the conflict grows substantially, analysts have predicted oil prices could surge over $100 per barrel, and perhaps as high as $120. The extent of the price-move depends on how the war escalates. Israel didn't directly strike Iran's oil infrastructure on Friday, but some analysts expect Israel to hit those facilities if the war continues. Iran, for its part, is in a position to disrupt oil shipments in the region, which could cause prices to spike even more. Iran produces about 3.2 million barrels of oil a day, and exports between 1.5 million and two million barrels of it. That is a significant piece of the 103 million barrels of global oil production, but not enough to completely disrupt the market. Israel isn't a major player, historically pumping less than 10,000 barrels a day. Israel could disrupt production if it hits Kharg Island in the Persian Gulf, which houses much of Iran's oil export infrastructure. Iran, in turn, has plenty of ways to respond that could affect the oil market even more. Iran and the military groups it supports, including the Houthis in Yemen, could create much wider disarray. After the Israel-Hamas war began in 2023, the Houthis attacked ships in the Red Sea—some of those carried energy products—causing a brief spike in the price of oil. But the Red Sea doesn't transport that much oil. The most important waterway is the Persian Gulf, which sits between Iran and Saudi Arabia. Iran and its proxies could block the Strait of Hormuz, a narrow waterway that connects the Persian Gulf to the Gulf of Oman and which offers access to markets all over the world. Thirty percent of the world's seaborne oil trade flows through it. China, which buys more of Iran's oil than any other country, is particularly dependent on supplies that come through the strait. Financial firm Lazard thinks oil prices would surge above $120 if the strait is blocked, and the U.S. would probably have to get involved to unblock it. Lazard thinks a short disruption to the strait is possible but considers an extended blockade 'highly unlikely due to catastrophic internal and international consequences and the ability of the U.S. Navy to intervene to open up the strait." Given its location and military capabilities, Iran could impact the market in other ways. Two Saudi Arabian oil facilities were damaged in military strikes in 2019, severely curtailing oil production, and Iran was believed to be behind the attacks. Tensions between Saudi Arabia and Iran have eased since then, but Iran could widen the conflict again by hitting Saudi facilities. J.P. Morgan analyst Natasha Kaneva thinks a wider Middle East conflict would cause an oil shock that could take prices over $120. Based on how oil traders reacted to the latest escalation of the war, she thinks the market is implying a 17% chance of a much more severe impact. Such a dramatic price spike feels like a long shot. The overall oil supply-demand picture is still bearish, with global oil supply set to outpace demand this year because of expected production hikes from members of OPEC. 'We expect, absent a wider war, today's rise in prices will likely prove to be a sell-the-news event," wrote Morningstar analyst Allen Good. The conflict, and its higher oil prices, isn't a reason for investors to pile into energy stocks, but it's a reminder of why they can be important pieces of a portfolio. Oil stocks jumped on Friday, even as the broader market and some Big Tech names fell. Exxon Mobil was up 2.2%, and Occidental Petroleum rose 3.8%. 'When tech stalls out, there's a natural rotation to energy companies," says Jay Hatfield, portfolio manager of the Infrastructure Capital Equity Income exchange-traded fund. 'They're actually pretty good hedges." Hatfield's fund owns Exxon and Chevron, which he thinks offer investors exposure to the industry without as much risk as smaller names. Oil's gains may well fizzle out eventually. But this war appears to be far from over, and oil is right in the middle of it. Write to Avi Salzman at
Mint
an hour ago
- Mint
Israel-Iran conflict: Crude oil prices jump 7% on supply worries as Middle East tensions escalate
Crude oil prices jumped over 7% on Friday as Israel - Iran conflict raised worries of a wider disruption in oil exports from the Middle East. Brent crude oil futures gained $4.87, or 7.02%, to settle at $74.23 a barrel after earlier soaring over 13% to an intraday high of $78.50, the strongest level since January 27. For the week, Brent oil prices rallied 12.5%. US West Texas Intermediate crude ended $4.94, or 7.26%, higher at $72.98 a barrel. During the session, WTI oil jumped over 14% to $77.62, its highest since January 21. WTI climbed 13% to its level a week ago. Both benchmarks recorded their largest intraday moves since 2022, when Russia's invasion of Ukraine triggered a spike in energy prices. Israel said it had targeted Iran's nuclear facilities, ballistic missile factories, and key military commanders, marking the beginning of what it described as a sustained operation aimed at preventing Tehran from developing nuclear weapons. Shortly after markets closed, Iranian missiles struck buildings in Tel Aviv, while explosions were also reported in southern Israel. Iran's National Iranian Oil Refining and Distribution Company said that oil refining and storage facilities remained intact and fully operational, Reuters reported. Iran, a member of the Organization of the Petroleum Exporting Countries (OPEC), produces approximately 3.3 million barrels per day (bpd) and exports over 2 million bpd of crude oil and fuel. Analysts and OPEC watchers estimate that spare production capacity among OPEC and its allies, including Russia, is roughly equal to Iran's output and could help offset any potential supply disruptions, according to Reuters. The escalating conflict has also heightened concerns over potential disruptions to the Strait of Hormuz, a critical chokepoint for global oil shipments. (With inputs from Reuters) Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
