OIL prices jumped US$3 a barrel on Friday in reaction to reports that Israeli missiles had struck a site in Iran, sparking concerns that Middle East oil supply could be disrupted.
The benchmark contracts surged more than US$3 then eased slightly. At 2am, Brent futures were up US$2.63, or 3%, to US$89.74 a barrel. The most active US West Texas Intermediate contract climbed US$2.56, or 3.1%, to US$84.66 per barrel.
US news outlet ABC News cited a US official as saying that Israeli missiles had hit a site in Iran.
Iran’s Fars news agency said explosions were heard at an airport in the Iranian city of Isafahan but the cause was not immediately known. Several flights were diverted over Iranian airspace, CNN reported.
“If these reports turn out to be true, fears over further escalation will only grow, as well as concerns that we are potentially moving closer towards a situation where oil supply risks lead to actual supply disruptions,” said ING head of commodities strategy Warren Patterson in a note.
The reports have sparked worry that Israel has responded to Iran’s drone and missile attack of last weekend, Patterson added.
Last weekend Iran launched hundreds of drones and missiles in a retaliatory strike after a suspected Israeli strike on its embassy compound in Syria. Most of the drones and missiles were downed before reaching Israeli territory, with minimal damage and casualties.
Investors have been closely monitoring Israel’s reaction to the April 13 Iranian drone attacks. The geopolitical risk premium in oil prices had been unwinding this week on the perception that any Israeli retaliation to Iran’s attack would be moderated by international pressure.
In global crude oil supply, Venezuela lost a key US license allowing the OPEC member to export oil to markets globally. The U.S. also announced sanctions on Iran, another OPEC member, targeting its unmanned aerial vehicle after the country’s drone strike on Israel last weekend.
The sanctions on Iran, however, exclude its oil industry. – April 19, 2024
