U.S. crude oil futures saw a slight drop as tension in the Middle East began to ease after Iran’s large-scale air assault on Israel was successfully defended off. The West Texas Intermediate contract for May lost 34 cents to $85.32 a barrel, with June Brent futures easing slightly to $90.18 a barrel. President Joe Biden described the attack as “unprecedented” and the U.S. intervened to help Israel shoot down most of the incoming drones and missiles. Despite the scale of the attack, little actual damage was caused in Israel, leading many experts to believe it was a calculated move to make a statement without escalating further conflict with Israel.
Following the air assault, the crude oil market is now anticipating the Israeli government’s response and whether this event could spark a direct war between Israel and Iran. If Israel were to retaliate forcefully, it could set off a spiral of escalation leading to an unprecedented regional conflict and a significant increase in geopolitical premiums. This attack was the first time Iran has directly targeted Israeli territory, with over 100 ballistic missiles fired from various locations in Iran, Iraq, Syria, and Yemen. The retaliation was in response to an earlier Israeli strike in Syria that killed several Iranian military officials, including a senior commander.
Despite the seriousness of the situation, both the U.S. and Iran have expressed a desire to avoid further escalation. President Biden assured Prime Minister Netanyahu of the U.S.’s commitment to Israel’s security but stated that the U.S. would not participate in offensive operations against Iran. Iran, meanwhile, has described the attack as a limited operation in self-defense and warned of a more severe response if Israel makes another mistake. The Iranian U.N. mission also cautioned the U.S. against intervening in the conflict, framing it as a matter between Iran and Israel.
Israel has stated that Iran must pay a price for its aggression, with a call for the Islamic Revolutionary Guards to be declared a terrorist organization. Amidst the tensions, the U.S. National Security spokesperson emphasized that President Biden does not want a wider war with Iran, and the coming hours and days will reveal more about the situation. The crude oil market will continue to monitor developments closely as the possibility of further escalation remains, impacting oil prices and market stability. Overall, the situation in the Middle East is tense but both sides seem to be working towards avoiding a full-scale conflict.
