Oil prices fell sharply, dropping over $3 a barrel on Monday, following Israel’s airstrikes in Iran that avoided key oil and nuclear sites, reducing immediate risks to energy supplies and easing some Middle East tensions.
At market opening, both Brent and U.S. West Texas Intermediate (WTI) crude hit their lowest prices since October 1. As of 01:39 GMT, Brent crude was down by $3.35, or 4.4%, to $72.70 a barrel, while WTI fell by $3.27, or 4.6%, to $68.51 per barrel.
The benchmarks had seen a 4% gain last week amidst concerns over Israel’s potential military response to an earlier Iranian missile attack and ahead of the U.S. election. However, analysts noted that the lower impact strikes, avoiding critical energy infrastructure, lowered the geopolitical risk premium in oil prices.
“The limited nature of the strikes, especially bypassing oil infrastructure, has raised hopes for a de-escalation, which led to the easing of the risk premium,” explained MST Marquee’s Sydney based energy analyst Saul Kavonic. He added that markets would closely watch Iran’s response in the coming weeks, as any escalation could revive the risk premium.
Analyst Vivek Dhar from the Commonwealth Bank of Australia pointed to resumed ceasefire negotiations between Israel and the Iran backed militant group Hamas, suggesting the focus may shift toward potential diplomatic outcomes. However, Dhar expressed skepticism over a lasting ceasefire, citing the ongoing tensions involving proxies like Hamas and Hezbollah.
Investment bank Citi adjusted its Brent price target to $70 per barrel from $74, reflecting the reduction in risk premiums. Meanwhile, Evans Energy analyst Tim Evans speculated that recent developments might influence OPEC+ to reconsider planned output increases, initially scheduled for December.
The OPEC+ coalition, including the Organization of the Petroleum Exporting Countries and its allies, upheld its production policy in October, with plans to raise output in December still on the table. The group is set to reconvene on December 1, followed by a full OPEC+ meeting.
