Israel-Iran Strike Shows Limited Impact on Oil Markets

Following Israel’s recent airstrike on Iranian targets, oil markets are showing a bearish trend. Historically, oil prices often dip after initial conflict strikes in the Middle East, as was seen during the Gulf War in 1991 and the Iraq War in 2003

With Israel’s recent strike confined to military installations and no direct targeting of Iranian oil infrastructure, significant disruptions to global oil supplies appear unlikely. Iran has downplayed the attack, with state media dismissing the strikes as minor and largely ineffective. Oman’s response, suggesting limited damage, further points to a potential cooling of tensions, which could stabilize the region. The absence of anticipated escalations drives bearish sentiment; Israel did not target Iran’s energy assets, nor has Iran responded with attacks on Saudi or other OPEC+ oil fields.

This restraint and warming relations between Saudi Arabia and Iran have decreased the chances of wider regional instability impacting the oil supply. Saudi Arabia’s condemnation of Israel’s actions also signals a reluctance to engage, aiming to avoid escalation. Traders are now closely monitoring the situation as the oil market reopens, with most expecting the war premium to recede, resulting in a sell-off. With bearish bets on oil prices at lower levels, including put options at $60-$65, a price drop could trigger further selling. As OPEC+ prepares to increase oil production by December, the anticipated surplus in supply for 2025 will add downward pressure on prices. If the current calm holds, markets may see prices decrease, as there’s less urgency to hedge against supply shocks.