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Published: October 24, 2024
Updated: October 24, 2024

Israel-Iran Tensions Ease: Oil Prices Likely to Dip as Market Calms

1. Oil Market Awaits Price Drop Amid Tensions

Oil prices are projected to dip on Monday after Israel’s recent airstrikes on Iran did not impact critical energy infrastructure. Analysts expect a brief price reduction, with Brent crude potentially falling to $74-$75 per barrel, as geopolitical risks subside with Israel's restrained approach.

2. Limited Impact on Energy Supply

Israel’s response to recent tensions in the Middle East targeted missile production sites near Tehran and western Iran, intentionally bypassing oil and nuclear infrastructure. This strategic restraint has lessened concerns about disruptions to energy supplies, calming market fears.

3. Market’s Response to Uncertainty Resolution

Last week, Brent and West Texas Intermediate (WTI) crude futures rose by 4% due to escalating tensions. Markets priced in the risk of a more severe response from Israel after Iran's missile activity on October 1. However, with no direct impact on oil assets, analysts suggest the market will experience a "buy the rumor, sell the fact" reaction, stabilizing prices.

4. Expert Predictions on Oil Price Movement

Harry Tchilinguirian, head of research at Onyx, commented that Israel’s timing of the strike—shortly after U.S. Secretary of State Antony Blinken's departure—worked to de-escalate further tension. "The market can breathe a big sigh of relief," Tchilinguirian said, predicting a swift deflation in the geopolitical risk premium on oil prices.

5. Limited Iranian Response Eases Market Anxiety

Iran downplayed the airstrikes, reporting minimal damage and signalling it may not respond, further reducing market uncertainty. IG market analyst Tony Sycamore noted that WTI crude could return to around $70 per barrel due to this restrained situation.

6. Temporary Price Decline Expected

UBS commodity analyst Giovanni Staunovo expects oil prices to decrease temporarily as a reaction to the restrained military actions. However, he noted that the market had not factored in a significant risk premium, suggesting any downside might be short-lived. In light of Israel’s targeted response and Iran’s muted reaction, oil prices are likely to drop temporarily as trading resumes. Market conditions indicate a quick easing in geopolitical tensions, providing temporary relief in oil price volatility.