Oil prices decline following Iran’s attack
In early Asian trade, oil prices experienced a decline following Iran’s reprisal attack on Israel during the weekend. Brent crude, a significant benchmark for global oil prices, experienced a decline but remained near $90 per barrel on Monday morning. Prices had already increased in anticipation of action by Iran, as Brent crude approached a six-month peak last week.
The Israeli Defence Minister, Yoav Gallant, has emphasized that the ongoing confrontation with Iran is far from being resolved.
According to energy analyst Vandana Hari, it is evident that the oil market does not perceive any immediate need to consider any potential increase in supply risks. According to an expert, there is a possibility that Brent crude could drop below $90. However, it is unlikely to experience a significant decline due to traders’ concerns about the conflicts in Gaza and Ukraine. Experts also noted that Israel’s response to the attack will have a significant impact on global markets in the coming days and weeks.
According to Peter McGuire from trading platform XM.com, the energy market is expected to experience volatility. He also predicts that oil prices could see a significant increase if Israel responds strongly to Iran’s actions. Nevertheless, according to April LaRusse, the head of investment at Insight Investment, it is probable that markets will remain stagnant until further information becomes available.
Regrettably, the ongoing situation in the Middle East has persisted for quite some time. As geopolitical tensions continue, the markets adopt a cautious approach, observing and waiting for developments. Rather than reacting with panic, they prefer to assess the situation before making any significant moves, as explained by the speaker.
Asian markets experienced a decline on Monday as investors assessed the repercussions of the attack. The Hang Seng in Hong Kong, Japan’s Nikkei 225, and the Kospi in South Korea experienced declines, while China’s Shanghai Stock Exchange Composite saw an increase of over 1%.
The price of gold has increased, reaching near record highs and trading at around $2,400 per ounce. Gold is commonly regarded as a secure investment during periods of uncertainty, and it experienced a significant increase in value prior to the upcoming weekend.
Iran retaliated against an attack on its consulate in the Syrian capital Damascus on 1 April by launching drones and missiles towards Israel over the weekend. It is widely believed that Israel was responsible for the consulate strike, although they have not officially claimed responsibility.
Iran ranks as the seventh largest oil producer globally, as reported by the US Energy Information Administration. Additionally, it holds the position of the third-largest member within the Opec oil producers’ cartel.
Last week, the price of Brent crude reached $92.18 a barrel, the highest it has been since October, before dropping to close at $90.45 on Friday. Experts suggest that the future of the oil price hinges on the potential impact of shipping through the Strait of Hormuz.
The Strait, located between Oman and Iran, plays a vital role in global trade, serving as a major shipping route for approximately 20% of the world’s oil supply. The majority of the oil exported by OPEC members, including Saudi Arabia, Iran, the UAE, Kuwait, and Iraq, passes through the Strait. On Saturday, Iran captured a commercial ship with connections to Israel while it was transiting through the Strait of Hormuz.
