Oil soars more than 6% after Israel's strike on Iran alarms market
Oil prices jumped more than $4 a barrel on Friday, hitting their highest price in almost five months after Israel struck Iran, dramatically escalating tensions in the Middle East and raising worries about disrupted oil supplies.
Brent crude futures jumped $4.60, or 6.63%, to $73.96 a barrel by 0612 GMT after hitting an intraday high of $78.50, the highest since January 27. U.S. West Texas Intermediate crude was up $4.99, or 7.33%, at $73.03 a barrel after hitting a high of $77.62, the loftiest since January 21.
Friday's gains were the largest intraday moves for both contracts since 2022 after Russia invaded Ukraine, causing energy prices to spike.
Israel said it targeted Iran's nuclear facilities, ballistic missile factories and military commanders on Friday at the start of what it warned would be a prolonged operation to prevent Tehran from building an atomic weapon.
"A key question is whether the Iranian retaliation will be limited to Israel or if the leadership will seek to internationalize the cost of tonight's action by targeting bases and critical economic infrastructure across the wider region," RBC Capital analyst Helima Croft said in a note.
Several oil traders in Singapore said it was still too early to say if the strike will affect Middle East oil shipments as it will depend on how Iran retaliates and if the U.S. will intervene.
"It's too early to tell but I think the market is worried about shutting off of the Strait of Hormuz," one of the traders said.
Barclays analyst Amarpreet Singh said the attack has alarmed oil markets although these attacks have had no effect on oil market fundamentals so far.
"In a worst-case scenario, the conflict could expand to other key oil and gas producers in the region, and shipping," he said in a note.
The $10 a barrel price gain in the past three days had yet to reflect any drop in Iranian oil production, let alone an escalation that could involve disruption to energy flows through the Strait of Hormuz, he said.
About a fifth of the world's total oil consumption passes through the Strait or some 18-19 million bpd of oil, condensate and fuel.
Iran's Supreme Leader Ayatollah Ali Khamenei said Israel will receive "harsh punishment" following Friday's attack that he said killed several military commanders.
U.S. Secretary of State Marco Rubio on Thursday called Israel's strikes against Iran a "unilateral action" and said Washington was not involved while also urging Tehran not to target U.S. interests or personnel in the region.
RBC's Croft said: "If oil is caught in the cross-fire, we anticipate that President Trump will seek OPEC spare barrels to try to keep a lid on prices and shield U.S. consumers from the economic impact of the Middle East conflict."
In other markets, stocks dived in early Asian trade, led by a selloff in U.S. futures, while investors scurried to safe havens such as gold and the Swiss franc. (Reporting by Florence Tan; Editing by Stephen Coates)
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What is the difference between a 'preemptive strike' and a 'preventive strike'. Are they not both acts of war? Wanis-St. John: "These are certainly acts of war. There's no question about it, the Israelis like to call attention and use "preemptive" and "preventive" doctrines in their military strikes, since every country under international laws and norms is allowed to defend itself against aggression, but no country is supposed to lawfully commit aggressions against another country." Sam Ratner, policy director, Win Without War: "'Preemptive strike' does seem to be, from a definitional standpoint, a misnomer from Israel... this is a war of choice from [Israeli Prime Minister] Benjamin Netanyahu." Pomper: "It's not a preemptive strike, because that would be [like] the Six Day War, where the planes are on the tarmac and about to attack you, and then you hit them. 'Preventive' is a stop to a long-term threat to Israel. And you know the Iranians aren't shy about threatening." 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Ratner: "In the post-9/11 era in particular, we've seen not just from the Israeli government, but from Iranian governments, including our own, in fact, and in particular our own, a real sort of generational change of attitude toward the use of assassination. We see it in our drone programme. The erosion of the norm against assassination is bad for diplomacy, bad for international relations, and bad for peace." Looking at the nature of Israel's attacks, can Iran retaliate in the same way? Wanis-St John: "I'm not sure that they can, operationally. I've never seen Iran do that against Israel.... you really need a lot of information about where [targets] are and where they're moving and how they're protected at night. That requires a lot of infrastructure. I'm not sure that the Iranians have that." Abdi: "If we're saying there are no laws, there is no accountability, you can conduct extra-judicial killings with impunity, then it would seem that would no longer restrain any actor from engaging in the same types of activities. But we know that that's not how the world works, and that certain countries have been given a carte blanche to do whatever they want." Mortazavi: "The condemnation would be so different... imagine if the same was done by Iran. Israeli officials also have homes and families." Why can't Iran have a nuclear bomb if Israel does? Mortazavi: "Iran is a signatory to the NPT, the Non-Proliferation Treaty. They have committed to not building nuclear weapons [and] they have a civilian programme. According to US intelligence, they don't have a weapons programme. At the same time, Israel has an undeclared weapons programme [and] many nuclear warheads. They're not a signatory to any international monitoring and safeguards." Ratner: "Our position on this is that we are opposed to nuclear proliferation and [in favour of] nuclear disarmament. Nuclear weapons are unimaginably destructive forces, and the more hands those weapons are in, the more likely that nuclear warfare becomes. If we add another country to the nuclear club, how many more countries will join?" Abdi: "Iran has threatened before that if something like [Friday's attacks] happened, they would abandon the NPT, and then there would be no international law saying they're not allowed to build nuclear weapons. They could do what Israel did, and develop a clandestine programme, and not be held accountable to any treaties or agreements or anything, and it's just the law of the jungle, and everybody gets a nuke." Israel has always said it wants to take out Iran's nuclear facilities. Isn't that dangerous? Pomper: "I think, as opposed to attacking a nuclear power plant that's got actual radioactive material, like Zaporizhzhia in Ukraine, it's different... You don't have that kind of concentration. And so you may have environmental and other damages, but you're not likely to get a widespread radiation danger from it." Wanis-St John: "They shouldn't really be targeted if they're not military programmes. No one has said that the Iranians are building a nuclear weapon at this time. They don't claim to be making one, and nobody on the outside claims that they are making one... The Israeli attack is really meant to send them a signal that any progress towards weapons-grade enrichment is not going to be tolerated by Israel." Ratner: "The bigger concern... is that Iran has made clear statements and threats that if the Israeli government strikes its nuclear facilities, that it will respond by striking US targets in the region. And what we see from Benjamin Netanyahu is a desire for exactly that to happen. His interest is in starting a chain of events that drags the US into war on his side, because the Israeli military would have a very difficult time pursuing regime change in Iran on its own."
