Oils Dips As Washington Threatens Sanctions And Iran Promises Retaliation

Meanwhile, the U.S.Fed's hawkish stance discourages analysts: File Image/Pixabay

The aftermath of Iran's failed attack on Israel saw concerns about supply disruptions ease, and as of 1625 GMT oil prices on Tuesday extended https://www.reuters.com/business/energy/oil-prices-rise-israel-weighs-response-iran-attack-2024-04-16/ their losses, but only by a trickle.

Brent for June delivery edged down 15 cents to $89.95 per barrel, while West Texas Intermediate fell 8 cents to $85.33.

This was despite the U.S. stating it planned to impose new sanctions on Iran: treasury secretary Janet Yellen said on Tuesday, "Clearly, Iran is continuing to export some oil; there may be more that we could do…..I don't want to preview our actual sanctions activities, but certainly that remains in focus as a possible area that we could address."

Meanwhile, Iran continued its sabre rattling, with president Ebrahim Raisi responding to Washington by saying the Islamic republic will respond to any action against its interests; although in the wake of Iran's humiliation on the world stage for its botched missile assault, it's unclear to what extent his rhetoric would have on crude trading.

Jorge Leon, senior vice president at Rystad Energy, said, "Tensions are high, and either party's next moves are hard to predict, but all the significant signs point toward an easing of hostilities and restraint in the short term."

Matthew Ryan, head of market strategy at Ebury, seemed to agree: "So far, markets appear rather sanguine to the rising tensions, and cautiously optimistic that Israel's response will be restrained, and that an all-out war will be sidestepped."

While oil dipped again on Tuesday, Bloomberg noted that almost 350,000 calls on Brent crude traded Monday, far exceeding the previous record set in 2019.

The news agency stated, "Those contracts also deepened their premium over bearish puts to the biggest since October as Israel flagged its intention to strike back."

Also on Tuesday, Philip Jefferson, vice chair of the U.S. Federal Reserve, vowed that the central bank would maintain its monetary policy if inflation failed to abate as expected.

This prompted Tim Snyder, economist at Matador Economics, to remark, "Rising interest rates are killing markets, as it appears the Fed is stuck in the mud, while the economy continues to inflate."