Oil trading has seen some of its most volatile days in recent history as non-stop missile strikes exchanged between Israel and Iran ratcheted up fears of potential supply disruptions from the Middle East. Amidst unsubstantiated reports of the two sides seeking a ceasefire, the risk premium is back in the ICE Brent as the global crude benchmark remains around the $75 per barrel mark.
Oil jumped nearly 3% as Israel’s strike on Iran’s Natanz site fuels fears of wider energy disruption. Diesel futures soared, Leviathan gas halted, and South Pars output hit. Market eyes possible Israeli strikes on Iran’s oil exports.
Brent spiked 3% to $75.55 after Israel struck Iran’s Natanz enrichment site, damaging critical centrifuge halls. With Hormuz risk rising, markets brace for supply disruption and inflation shock. Brent crude holds above $75 per barrel as Israel bombs Iran’s Natanz nuclear enrichment facilities.
In the meantime, traders continue to speculate about the possibility of US involvement in the war and the possibility of physical crude supply disruptions. Prices have been influenced by recent geopolitical tensions, particularly the Israel-Iran conflict, though concerns about supply disruptions have eased as Iran’s crude production and exports appear unaffected. Analysts note prices are likely to remain capped below $80 per barrel despite these events.
As the Israel-Iran war shows no signs of abating, market participants are speculating whether Israel could target Iran’s oil export infrastructure after its strikes on the South Pars gas field. World’s largest gas field reduces output. Israel’s strikes on Iran’s section of the South Pars field, the continuation of Qatar’s North Dome play into Iranian territorial waters, debilitated one of the four refining units of Phase 14 with a capacity of 4 bcm per year or 2% of the country’s output.
Up until now, Iranian oil exports have seen no impact from the barrage of missile strikes with May exports posting a multi-year high of 1.8 million b/d and June loadings keeping the same pace so far. Iranian producers of methanol, ammonia and urea have mostly shut production in a precautionary way, following strikes on the Tehran refinery, which the Iranian side reciprocated by hitting Israel’s 195,000 b/d Haifa refinery.
Israel has no crude production of its own, relying for imports to meet its downstream needs, however the Leviathan and Tamar fields could be targets for Iran’s missile strikes, prompting the Israeli government to shut both fields down.
Diesel gains the most from Middle East flare-up. US diesel futures saw an unprecedented surge in the wake of the Israel-Iran hostilities, rising even steeper than crude oil to $2.38 per gallon and improving the ULSD crack to a whopping $28 per barrel, as markets feared supply disruptions from the Middle East.
/X, OilPrice/