By Adedapo Adesanya
The oil market crashed heavily on Monday by over 6 per cent over Israel’s limited attacks on Iran, with Brent futures going down by $4.63 or 6.09 per cent to $71.42 a barrel and the US West Texas Intermediate (WTI) futures declining by $4.40 or 6.13 per cent to $67.38 per barrel.
Over the weekend, jets from Israel completed three waves of strikes before dawn against missile factories and other sites near Tehran and in western Iran, heightening tensions in the region further.
The attacks were more tailored toward military targets – including Iran’s air defences, as well as missile and drone production, and launch facilities – easing fears that Israel might attack Iran’s nuclear facilities or oil infrastructure.
Also, Iran’s Supreme Leader Ayatollah Ali Khamenei helped cool tensions on Sunday when he signalled there would not be any direct response to Israel’s latest attacks.
The markets have been waiting for the majority of the month for a retaliation by Israel following the direct Iranian offensive against the Jewish state earlier this month. Broader Middle East tensions have continued to rise after the attack on Israel by Iran-backed Hamas on October 7 of last year.
Iran accounts for up to 4 per cent of global oil supplies, according to the US Energy Information Administration (EIA).
This development has led analysts like Citi to lower Brent’s price target for the next three months to $70 a barrel from $74, factoring in a lower risk premium in the near term.
“The recent Israel military action is unlikely to be seen by the market as leading to an escalation that impacts oil supply,” Citi analysts wrote in a note Monday.
A de-escalation that will cause markets to refocus on surplus supply and lacklustre demand.
The Organisation of the Petroleum Exporting Countries and its allies in OPEC+ kept oil output policy unchanged last month, including a plan to start raising output in December.
The group will meet on December 1 ahead of a full meeting of OPEC+
Even before the latest developments, Goldman Sachs had warned that there was limited upside for oil prices in 2025, citing spare capacity and weak demand.
Market attention will also turn to Hamas‑Israel and Israel‑Hezbollah cease-fire talks that resumed over the weekend.