Oil prices fall after Iran’s attack on Israel

STORY: Oil prices in the international market fell on Monday. Markets dialed back risk premiums following Iran’s weekend attack on Israel.

One analyst told Reuters that the limited scale of the assault raised hopes that it wouldn’t spark major escalation.

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International benchmark Brent crude fell over 1 per cent to under $90 a barrel by mid-morning in Europe. Benchmark US oil futures saw similar declines.

Iran’s action involved more than 300 missiles and drones, and was the first attack on Israel from another country in more than three decades.

But the attack caused only modest damage, with missiles shot down by Israel’s Iron Dome defense system. Even so, it raised concerns about a wider regional conflict affecting oil traffic through the Middle East.

Iran said it was retaliation for an air strike on its Damascus consulate. Israel has neither confirmed or denied it struck the facility.

One leading analyst said there is now plenty of uncertainty and oil prices could be further impacted by how Israel responds.

Iran currently produces over 3 million barrels per day of crude oil and is a major player within OPEC.

Analysts said supply risks included more strictly enforced oil sanctions. They added an Israeli response could involve targeting Iran’s energy infrastructure.

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Oil benchmarks had risen on Friday in anticipation of Iran’s attack and reached their highest levels since October.

Analysts were widely expecting at least a short-lived rally in prices this morning. However, they said a major long-term impact would only come if there was evidence of material impact on oil supplies.