Oil Skyrockets As Iran's Missile Attack Against Israel Begins

Analysts weigh in on potential outcomes, ramifications: File Image/Pixabay

Amid Iran's second rocket attack on Israel this year, oil on Tuesday leaped by almost 4 percent, pushing prices to the highest level in nearly one year.

As of 1550 GMT, as hundreds of missiles were launched toward Holy Land, Brent was up $2.50, or 3.5 percent, to $74.20 per barrel; West Texas Intermediate rose $2.54, or 3.7 percent, to $70.71.

However, even though this represented a major swing from weeks of sluggish trading, concerns were voiced about sustained higher energy prices increasing input costs for goods and services, in turn exacerbating inflation – and ruining demand.

James Reilly, senior markets economist at Capital Economics, wrote that "much remains uncertain" about Tuesday's oil spike, and he added that a key issue will be the attack's "size and whether it inflicts significant damage, particularly in civilian areas; a major escalation by Iran risks bringing the U.S. into the war, which Tehran will presumably seek to avoid."

Reilly went on to note that "In any event, the impact on oil prices will remain the key channel of transmission to the global economy…..an important consideration will be whether Saudi Arabia increases production if Iranian supplies were disrupted."

Rebecca Babin, senior energy trader at CIBC Private Wealth, said, "The key factor for crude will be whether Israeli defense systems are able to shield against the attack and what subsequent actions Israel might take; in the near term, we could see a few more dollars of short covering in crude."

Helima Croft, head of global commodity strategy at RBC Capital Markets, said that while "There has been a lot complacency about this war," the question is whether Israel will target Iran's nuclear facilities or oil infrastructure: "We do need to think about a scenario where Iranian oil supplies are at risk."