Oil prices experienced a significant increase on Friday following a comprehensive military operation by the Israeli Defense Forces (IDF) targeting Iran’s nuclear sites and military leadership.
On the New York Mercantile Exchange, West Texas Intermediate crude rose nearly 6%, reaching $72 per barrel. Market analysts on Wall Street expressed heightened concern that the military action could exacerbate tensions between Israel and Iran, potentially disrupting Iranian oil exports. Meanwhile, the global benchmark Brent crude surged by as much as 10%, peaking at its highest value since January, approximately $73.50 per barrel by noon ET.
According to Andy Lipow, president of Lipow Oil Associates, the marketplace is particularly concerned about the possibility of Iranian retaliation against Israeli or American interests, which could lead to military escalation and further disruptions in oil supply.
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Lipow further noted that Iran might perceive the recent OPEC+ oil supply increases, which have exceeded market expectations over the past three months, as a tactic to compensate for declining Iranian oil exports amid escalating hostilities. He suggested that a significant decline in Iranian oil could inflate prices by up to $7.50 per barrel, and should disruptions occur in exports via the Strait of Hormuz, prices could soar to $100 per barrel.
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Phil Flynn, a senior energy analyst at The PRICE Futures Group, indicated to Finance Newso Business that the current situation may not lead to drastic price increases, noting an absence of reports indicating damage to oil infrastructure. He underscored that though Iran has made threats in the past to control the Strait of Hormuz, such actions are unlikely.
“It is evident that they lack the military capacity to execute such threats, particularly following the loss of key leaders from the Iranian Revolutionary Guard,” Flynn, who also contributes to Finance Newso Business Network, commented.
Flynn observed that initial market reactions tend to be exaggerated in such circumstances but typically stabilize over time.
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He mentioned that the next few days will be pivotal as the market assesses the situation, hinting that oil prices may adjust to a more balanced level going forward.
