Oil falls over 7% as Iran focuses retaliation on US military base

Qatar Tribune

9 hours ago

Agencies
New York
Oil prices sank more than seven percent on Monday after Iran attacked a US military base in neighboring Qatar in retaliation for US weekend strikes on Iranian nuclear facilities.
Futures for West Texas Intermediate fell 7.42 percent to $68.36 a barrel, while Brent oil futures dropped 7.34 percent to $71.36 a barrel, its lowest level in 10 days.
A US defence official said there were no known American casualties from the incident, which analysts said did not appear to be near key oil infrastructure.
John Kilduff of Again Capital described the Iranian action as 'somewhat measured' and apart from population centers.
'This is a face-saving measure by the Iranians and hopefully the diplomatic off-ramp will be taken,' Kilduff said.
The Iran-Israel clash has focused worry on the Strait of Hormuz, a strategic waterway for seaborne oil that has long been used by Iran as a geopolitical bargaining chip.
Tehran has for decades threatened to close the strait every time tensions soared, but never acted on its warning.
But Kilduff said, 'it's pretty clear that this is not going to turn into – right away at least – any kind of impact on oil flows in the region, particularly the Strait of Hormuz.'
President Donald Trump on Monday also demanded that 'everyone' keep oil prices down or they would play 'into the hands of the enemy,' as the conflict in the Middle East escalates following US strikes on Iran.
Trump's message comes after the US bombed Iran's key nuclear sites over the weekend, putting the world on edge that the Islamic Republic might target energy supplies in the Middle East and cause a spike in global oil prices.
It wasn't clear who specifically Trump was speaking to in his post, though he seemed to be addressing the US oil industry. Some oil companies had warned earlier in the year that they might have to cut production after prices tumbled to multiyear lows on Trump's tariffs and OPEC+ boosting supply.
'To The Department of Energy: DRILL, BABY, DRILL!!! And I mean NOW!!!,' Trump said in a subsequent post on Monday. Oil production decisions in the U.S. are made by private companies in response to market dynamics. The Energy Department does not drill for oil.
'As the President said, producers must keep oil prices down or risk playing into the hands of the enemy,' White House spokesperson Harrison Fields said when asked who Trump was addressing.
Equities remained restrained, with the dollar getting a modest safe-haven bid and no sign of a rush to bonds.
Some market participants hoped Iran might back down, with its nuclear ambitions curtailed, or even that regime change might bring a less hostile government to power there.
'That said, any sign of Iranian retaliation or threat to the Strait of Hormuz could quickly shift sentiment and force markets to reprice geopolitical risk more aggressively,' said Charu Chanana, chief investment strategist at Saxo.
The Strait of Hormuz is only about 33 km wide at its narrowest point and around a quarter of global oil trade and 20 percent of liquefied natural gas supplies passthrough it.
Analysts at JPMorgan cautioned that past episodes of regime change in the region typically resulted in oil prices spiking by as much as 76 percent and averaging a 30 percent rise over time. Goldman Sachs warned prices could temporarily touch $110 a barrel should the critical waterway be closed for a month.
World share markets, especially in Asia, struggled. MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.9 percent, dragged down by shares in Taiwan which closed 1.42 percent lower, while Chinese blue chips closed higher 0.3 percent and Japan's Nikkei eased 0.1 percent. Japan's manufacturing activity data on Monday showed a return to growth in June after nearly a year of contraction, but demand conditions remain.