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Oil prices rise as investors fear an attack on Israel by Iran, OPEC’s third-largest oil producer. Brent rose by 0.71% to 90.38 dollars a barrel and WTI by 0.88% to 85.77 dollars a barrel. After alleged Israeli warplanes bombed Iran’s embassy in Damascus, Israel is preparing for a direct attack by Iran, in the south or north of the country, within the next 24 to 48 hours. According to US officials, the attack is imminent and could be “bigger than usual”. But not enough to drag Washington into war. However, if Tehran were to do so, the Israeli authorities have already prepared a plan that involves striking the heart of the country.
More buying of crude oil call options
Rising geopolitical tensions, including Russian attacks on Ukrainian energy infrastructure, have fueled bullish activity in the oil options market. There has been an increase in call option buying in recent days, while implied volatility has increased. Despite today’s rise, the price of oil is heading for a weekly loss but Brent is still up 17% since the beginning of the year, partly thanks to production cuts by OPEC+.
Fed balance needle
If we add to all this the war in Gaza and the Houthi attacks on ships in the Red Sea (US Central Command forces destroyed an anti-ship ballistic missile launched by Yemen from terrorist-controlled areas), crude oil supplies are increasingly at risk. “Geopolitical risks remain high,” Anz Research said, adding that oil prices increased by almost 19% also thanks to improving economic conditions and supply cuts by OPEC+. But the growing prospect of longer-than-expected interest rates in the United States could dampen economic growth and reduce demand for crude oil.
Eng: no alarmism
“The threat of Iran’s involvement in the Middle East conflict is likely to push crude prices higher again,” predicted Charu Chanana, an analyst at Saxo Capital Markets. “But the recent rally may remain at risk of consolidation or reversal if further escalation is avoided.” For ING, if there are no further escalations in the Middle East or supply interruptions, “our forecast which sees Brent at an average of 87 dollars a barrel in the second quarter of this year remains valid”. (All rights reserved)
