Oil prices experienced a significant surge of over 3% on Friday following reports of an Israeli strike in Iran, sparking concerns of an escalating conflict in the Middle East.
Confirming the operation, a U.S. official disclosed to NBC News that Israel had conducted a military strike in Iran. The strike, described as limited in scope, was executed during the early hours of Friday morning local time. A source familiar with the situation informed NBC News that Israel is currently evaluating the effectiveness of the strike and the resultant damage.
Initially surging over 3%, both oil benchmarks have moderated slightly since then. Global benchmark Brent climbed 1.73% to $88.62 per barrel after briefly surpassing $90, while U.S. West Texas Intermediate rose 1.75% to $84.1 per barrel.
The rise in tensions also led to a surge in safe-haven assets. Spot gold prices soared to a new all-time high of $2,411.09 per ounce, and the yen strengthened by 0.45% to 153.93 against the U.S. dollar.
Reports from Iran’s Fars news agency indicated explosions near Isfahan’s airport, with flights to Tehran, Isfahan, and Shiraz airports being suspended.
Flight tracking data from Flight Radar 24 revealed multiple flights being diverted over Iranian airspace early Friday.
End of the ‘Shadow War’
Israel’s retaliatory action follows Iran’s large-scale aerial assault on the Jewish state over the weekend. In response, Israel vowed to “exact a price” from Iran. Clay Seigle, Director of Global Oil Service at Rapidan Energy, remarked, “With Israel’s apparent strikes on Iran today, retaliating for Iran’s attack on Israel last Sunday, we now have a direct nation-on-nation hot war.” He added, “The ‘shadow war’ chapter has come to an end.”
Despite reaffirming support for Israel, President Joe Biden assured Israeli Prime Minister Benjamin Netanyahu that the U.S. would refrain from participating in offensive operations against Iran, according to a senior administration official.
Sarah Leah Whitson, executive director of Democracy for the Arab World Now (Dawn), criticized Israel’s decision to engage in military action despite objections from its allies, calling it “irresponsible and unaccountable.”
Seigle cautioned that it is premature to predict future developments but highlighted the significant risk posed to oil markets by a potential disruption of oil exports from the Arabian Gulf. The region, responsible for more than 20 million barrels of oil per day, could face further instability. He also warned of the potential impact of a closure of the Strait of Hormuz, a vital chokepoint through which a substantial portion of global oil production flows daily, which could lead to a substantial increase in oil prices and trigger demand destruction.
The situation remains fluid, with uncertainties looming over the region’s stability and its implications for global energy markets.