Oil prices build on gains as Israel vows revenge after Iran strike
Oil prices rose for a second day after Iran fired nearly 200 ballistic missiles at Israel, prompting Prime Minister Benjamin Netanyahu to vow revenge, raising the risk to regional oil supplies.
Brent crude, the global benchmark, rose above $76 a barrel, having jumped more than 5% in Tuesday’s trading after the Iranian attack, which was preceded by warnings from the United States. Options volatility rose to an 11-month high as traders hedged against the possibility of higher prices.
Markets respond to geopolitical risks
The rise in oil prices reflects investors’ perception of increased risks to the world’s most important commodity, with the Middle East accounting for about a third of global supplies. Safe-haven assets such as bonds, gold and the U.S. dollar have also gained amid the latest escalation in the conflict.
While Israel and Iran have been locked in a war in Gaza against Tehran-backed Hamas nearly a year ago, previous price spikes have been short-lived in the absence of any actual disruption to production. Iran pumped about 3.3 million barrels a day in September, according to a Bloomberg survey.
“Despite the geopolitical risk premium rising on Tuesday, our tools suggest that this premium remains moderate,” Goldman Sachs analysts including Yulia Jestkova Grigsby said. “As such, oil prices remain sensitive to the risk of supply disruptions.”
