Oil Hits Multi-Year High As Israel Strikes Iran, Weathers Counterattack

Meanwhile, analysts scramble to determine how badly global oil supply will be affected: File Image/Pixabay

Oil on Friday skyrocketed by 7 percent after Israel launched missile strikes against Iran's nuclear facilities and the Islamic republic staged a counterattack against Israeli civilians, while analysts feared an escalation of hostilities that might cause supply disruptions.

Brent settled up $4.87 at $74.23 per barrel, and West Texas Intermediate settled up $4.94 at $72.98 per barrel.

Brent and WTI had their largest intraday moves (over 13 percent and 14 percent respectively) since 2022, when Russia invaded Ukraine.

Ahmad Assiri, research strategist at Pepperstone, wrote that the surge illustrates "both immediate supply concerns and a growing sense that negative headlines could extend the timeline for escalation unlike the prior Israel-Iran episode."

Israeli prime minister Benjamin Netanyahu said in a televised address that the "targeted military operation" is expected to continue for "as many days as it takes to remove this threat."

Andy Lipow, president of Lipow Oil Associates, voiced earlier concerns that "Should oil exports through the Strait of Hormuz be affected, we could see $100 oil."

The Organization of the Petroleum Exporting Countries on Friday dismissed the idea that surging oil prices may require the release of emergency stockpiles: "currently no developments in supply or market dynamics warrant unnecessary measures."

The International Energy Agency gave assurances on Friday that if shipping through Hormuz were suspended, it is well supplied to release emergency reserves from its 1.2 billion barrel stockpile; this caused OPEC to accuse the IEA of raising "false alarms" and projecting "market fear."

While many analysts agreed that further shocks to oil would come in the days ahead due to the hostilities, Brian Jacobsen, chief economist at Annex Wealth Management, said, "This is an economic shock that nobody really needs, but it is one that seems more like a shock to sentiment than to the fundamentals of the economy."

Aljazeera noted that the price surge "comes on the heels of a better-than-expected Consumer Price Index report in the U.S. earlier this week, which showed prices increased by just 0.1 percent for the month…energy costs remain a key inflation driver; petrol prices, in fact, fell 2.6 percent during the period, [and] consumer sentiment, too, jumped for the first time in six months as tariff fears eased."

However, JPMorgan Chase said, "sustained gains in energy prices could have a dire impact on inflation, reversing the months-long trend of cooling consumer prices in the U.S."

Attempting to provide a longer term view in addition to short-term speculation was Goldman Sachs analyst Daan Struyven, who raised his short-term price target, warning that the conflict could briefly cut 1.75 million barrels per day (bpd) of Iranian oil, causing Brent to rise above $90; but he expected prices to fall back to the $60s by 2026, as supply recovers.