Oil falls as traders calmly look beyond Middle East bombs
NEW YORK—If oil prices are any measure, Iran just flinched.
The price of oil tumbled Monday afternoon in an historical move as traders bet that Iran’s decision to bomb a US base in Qatar signals it is not planning to do the one thing that could really hurt America: Shut down the flow of oil by attacking crude shipments.
“When the response comes and it is muted, oil drops,” said Tom Kloza, chief market strategist at consultancy Turner Mason & Co., calling the limited Iran response far short of what many traders feared. “This rivals some of the historic selloffs.”
Alternatives
There’s still plenty Iran could do to push prices back up, and the markets could be getting it all wrong, But oil analysts say there are plenty of reasons fear has receded.
The price of West Texas Intermediate, the US benchmark, fell 7.2 percent to $68.51 per barrel in regular trading on Monday after Iran announced a missile attack on Al Udeid Air Base in Qatar, which the US military uses.
Traders were relieved because Iran said it had matched the number of bombs dropped by the United States on Iranian nuclear sites this weekend, a possible sign of a desire to deescalate the conflict.
The price of oil fell further after President Donald Trump announced that Israel and Iran had agreed to a “complete and total ceasefire” to be phased in over 24 hours.
Oil fell an additional 3.5 percent to $66.10, and the price is now below where it was before fighting between Iran and Israel began over a week ago, when a barrel of US crude was just above $68.
‘Doubtful’
Markets were initially nervous Sunday as oil futures opened for trading.
The price of Brent crude, the international standard, jumped 4 percent as traders anxiously watched the Strait of Hormuz, a waterway on Iran’s southern border that legislators in Tehran were demanding be closed in retaliation.
That would have walloped the global economy because much of world’s crude and liquified gas passes through it.
That’s good news for President Donald Trump who wants the Federal Reserve to stop worrying about inflation and start cutting interest rates. It’s also good for motorists this summer if the trend holds.
Drivers were already paying higher prices at the pump before the US attack. The average price nationwide is $3.18 per gallon, according to GasBuddy surveys, about 10 cents more than two weeks ago.
The question now is will Tehran continue to keep oil flowing.
Some traders were doubtful Iran would try to close the Strait of Hormuz even before its limited attack Monday.
They noted that much of country’s own crude passes through the waterway—1.5 million barrels a day—and oil is a big revenue generator for the country that they would be loath to disrupt.
