Oil prices jump as Iran plots retaliation against Israel

Escalating tensions cause prices to rise by more than $2 a barrel

Oil prices rose on Friday amid warnings that Iran is plotting a retaliatory strike against Israel.
The threat of escalating tensions led to prices rising by more than $2 a barrel, as traders responded to fears that fresh hostilities in the Middle East could disrupt global oil supplies.
By mid-morning on Friday, the price of Brent crude had risen to $74.64, up from $72.31 on Thursday and $70.90 on Tuesday.
The recent jump comes amid reports Iran is preparing to launch an attack against Israel within days, potentially from Iraqi territory.
In a speech on Thursday, Major General Hossein Salami, of Iran’s Revolutionary Guards, said Tehran’s retaliation against Israel would be “unimaginable”.
It comes after Israel launched airstrikes on Iran last weekend.
Ashley Kelty, research director at Panmure Liberum, said: “It appears that markets have been too quick to write down the war premium for the Middle East, and the rise on Thursday reflects this.
“While the impact of the attacks would be on the smaller scale, the potential to drag Iraq into the equation for the conflict would open up scope for future attacks which could damage Iraqi energy infrastructure, and disrupt supplies.”
The latest rise has partially reversed the longer-term trend of declining oil prices, as the cost of a barrel was previously above $90 in April.
A gradual fall over the summer was largely caused by concerns over global oversupply and reduced demand caused by an economic slowdown in China.
However, while the recent rhetoric from Tehran has fuelled an increase in prices, Ole Hvalbye, a commodities analyst at Norwegian investors SEB Research, told Reuters neither Iran nor Israel will want to trigger a full-scale regional war.
He said: “Any additional responses from Iran might remain restrained, similar to Israel’s limited strike last weekend, hence primarily intended as a demonstration of strength rather than an invitation to open warfare.”
Analysts have also warned that future oil prices will be impacted by the outcome of the US election, as well as uncertainty surrounding the Opec cartel’s decision to increase oil production this month.
“Several international events have converged at the turn of the month that could see oil markets in for a bumpy ride in early November,” said Mukesh Sahdev, from Rystad Energy.
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