Oil prices have reportedly fallen on Monday following Iran’s retaliation attack on Israel over the weekend.
Brent crude, which is a key benchmark for oil prices internationally, was lower but still trading close to $90 a barrel on Monday morning.
Prices had already risen in expectation of action by Iran, with Brent crude nearing a six-month high last week.
Fluctuations in oil prices can cause ripple effects worldwide due to countries heavily relying on the commodity to produce fuels such as petrol and diesel. Fuel and energy prices have significantly contributed to the higher cost of living globally in recent years.
When Russia invaded Ukraine in 2022, oil prices soared to $120 a barrel over supply fears as western nations-imposed sanctions on Russia, a major oil exporter globally.
This increase led to higher prices at petrol pumps and other goods as businesses adjusted their prices to cover higher costs.
Analysts noted that Israel’s reaction to the attack would be crucial for global markets in the coming days and weeks.
Israeli Defence Minister Yoav Gallant stated that the confrontation with Iran was “not over yet”. This statement came after Iran launched drones and missiles towards Israel over the weekend following a vow to retaliate for an attack on its consulate in the Syrian capital Damascus on 1 April.
Israel did not claim responsibility for the consulate strike, but it is widely believed to have been behind it.
At the end of last week, the price of Brent crude touched $92.18 a barrel, the highest since October. However, early on Monday, it had fallen back to around $89.70. Energy analyst Vandana Hari suggested that the fall in oil prices indicated that “the oil market does not see the need to factor in any additional supply threat at this point”.
However, Peter McGuire from trading platform XM.com anticipated volatility in the energy market and predicted that oil prices would surge if Israel responded strongly to Iran’s move.
April LaRusse, head of investment at Insight Investment, believed that markets would “trade sideways until we have more information”.
She added that the situation in the Middle East had been ongoing for some time, and markets typically wait to see before reacting. Share markets in the Asia-Pacific region slipped on Monday as investors assessed the impact of the attack.
The Hang Seng in Hong Kong, Japan’s Nikkei 225, and South Korea’s Kospi were all lower, while China’s Shanghai Stock Exchange Composite was over 1% higher.
The price of gold edged higher, hovering near record highs, trading close to $2,400 an ounce. Gold is often seen as a safe investment during times of uncertainty and rose sharply ahead of this weekend.
Iran is the seventh-largest oil producer globally, according to the US Energy Information Administration, and the third-largest member of the OPEC oil producers’ cartel. Analysts highlighted that a key issue for the oil price going forward would be whether shipping through the Strait of Hormuz would be affected.
The Strait, between Oman and Iran, is a crucial shipping route, with approximately 20% of the world’s total oil supply passing through it. OPEC members Saudi Arabia, Iran, the UAE, Kuwait, and Iraq mainly export their oil through the Strait.
On Saturday, Iran seized a commercial ship with links to Israel as it passed through the Strait of Hormuz.
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