Oil Holds Advance As Traders Brace For Iran Strike On Israel
Oil held a gain as the market braced for a potential strike on Israel by Iran or its proxies, which could spark an escalation of hostilities in the Middle East.
(Bloomberg) -- Oil held the first gain in three sessions as traders watched for a potential attack on Israel by Iran or its proxies, which could spark a significant escalation of hostilities in the Middle East.
Brent futures traded above $90 after closing 1.1% higher on Wednesday, while West Texas Intermediate was near $86. The US and its allies believe a strike is imminent, according to people familiar, which would follow a threat by Iran to hit Israel for an attack on a diplomatic compound in Syria last week.
Oil is up around 17% this year as geopolitical tensions combine with OPEC+ supply cuts to drive prices higher. Still, there are headwinds in the form of swelling US crude stockpiles — now at the highest since July — and a hot US inflation print, which may delay rate cuts from the Federal Reserve.
Many of the world’s top traders and Wall Street banks are shifting toward a bullish tone on prices, with some seeing a possible return to $100 for the global benchmark. However, Macquarie Group said Brent will enter a bear market in the second half, with recent gains unlikely to hold if geopolitical events don’t lead to actual supply disruptions.
“The current geopolitical environment continues to provide support to oil prices,” said Warren Patterson, the head of commodities strategy for ING Groep NV in Singapore. However, “further upside is limited without a fresh catalyst or further escalation in the Middle East.”
On Wednesday, Iran’s Supreme Leader Ayatollah Ali Khamenei repeated a vow to retaliate against Israel for the Damascus strike. Even so, the head of the naval forces said recently that the country won’t block the Strait of Hormuz, a major trade route for Middle Eastern oil.
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