After remaining low for months, Iran’s direct attack on Israel finally pushed oil prices upward.
Oil prices immediately skyrocketed on Tuesday after Iran launched a direct missile attack against Israel, the second since the outbreak of the Gaza war in October 2023. At the moment of writing, some explosions could already be heard in Tel Aviv. “I did see impacts. I saw two impacts close to the hotel here and I saw another one further north of here, I might guess a couple of miles where I did see some fire and explosion,” CNN’s Jim Sciutto said.
Brent, the global benchmark of oil prices, jumped almost 5% to $75.15 per barrel on Tuesday. The cost of West Texas Intermediate increased by 5.09% to $71.63/barrel.
“Jerusalem will not hesitate to widen its military offensive to hit Iran directly. And Iran’s oil assets are very likely on the target list,” Clay Seigle, an independent political risk strategist, said before the attacks took place.
Last April, the Iranian Armed Forces launched their first direct attack against the Jewish state. The strike was in retaliation for the Israeli bombing of the Iranian embassy on April 1, which left 16 people killed. The Israeli defense forces later confirmed that 99% of the missiles were destroyed before they reached Israel’s air space.
On that occasion, Brent prices reached their highest level this year, breaching the $90/barrel level.
First oil rally in months
Since April’s record high, oil prices have been on a bearish note this year. China’s weak demand and the US overproduction of crude helped prices stabilize and even decline.
Oil prices remained low even following Israel’s attack against Hezbollah, killing its entire command structure in a matter of weeks including its leader Hassan Nasrallah.
Following Nasrallah’s death, Israel conducted a military operation on the Lebanese border, reportedly seizing some military infrastructures in Lebanon.
Iran’s attack on Tuesday was in retaliation for Nasrallah’s death and Israel’s attack on Lebanon.
Despite the downward pressure from China and the United States, oil prices could nevertheless begin an upward trajectory. In April, Israel experienced little to no material destruction and only 1 individual was gravely injured by the attack.
Footage of Iranian missiles directly hitting civilian infrastructure in major Israeli cities suggests the destructive power of this attack was higher. Unlike last time, Israel could decide to respond and escalate, firing the first direct war between the Jewish state and Iran.
A wider war in the Middle East would have devastating effects on the global economy, starting from a spike in the price of oil.
