Oil Dips On Iran's Missile Attack As World Awaits Israel's Response

Scenarios ranging from sublime to wild place oil at between $100-$140 per barrel: File Image/Pixabay

Geopolitical tensions that reached their peak in last week's final session with fears that Iran would directly attack Israel abated on Monday after the Islamic republic tried but failed to inflict damage – and oil prices as a result dipped, but minimally.

Brent settled down 35 cents at $90.10 per barrel, and West Texas Intermediate settled down 25 cents to $85.41 per barrel.

Bob Yawger, director of energy futures at Mizuho, said, "The success of the Israeli defense implies that the geopolitical risk has pulled back considerably."

With Iran, whose sabre rattling has swayed crude trading significantly over the years, humiliated on the world stage, its attempt to save face by declaring its retaliation to be over further reduced geopolitical tensions, according to Kpler analyst Viktor Katona.

However, JPMorgan Chase & Co. analysts including Natasha Kaneva wrote in a note to clients, "At this juncture, the outlook for oil seems to hinge on Israeli response to the attack."

Indeed, Andy Lipow, president of Lipow Oil Associates, said, "Any attack on oil production or export facilities in Iran would drive the price of Brent crude oil to $100, and the closure of the Strait of Hormuz would lead to prices in the $120 to $130 range."

The Strait reference was in response to Iran on Saturday seizing a container ship in that region which Tehran claimed was linked to Israel.

For its part, Societe Generale revised its forecast and disclosed in a note that direct military action between the U.S. and Iran could propel Brent to $140 - although few strategists believe such as conflict is within the realm of possibility.

Not to be outdone, strategic analyst Gregory R. Copley took a dissenting view by calling the Iran attacks "pure political theatre" and stating that Israel will defer a response.

Crude's price dip on Monday was also influenced by robust retail sales data from the U.S., which reinforced analytical concerns that interest rates would remain intact despite earlier expectations of them being lowered, and thus potentially reducing oil demand.

In other oil news on Monday, data showed that Russia has restored some production from refineries damaged by Ukraine drone hits: capacity currently offline is now estimated by Reuters at around 660,000 barrels per day (bpd), compared to 907,000 bpd offline at the end of March.