Oil jumps nearly 9% after Israeli strike
Oil prices jumped nearly 9 percent on Friday to near multimonth highs after Israel launched strikes against Iran, sparking Iranian retaliation and raising worries about a disruption in Middle East oil supplies.
Brent crude futures were up $6.19, or around 8.9 percent, to $75.55 a barrel at 1019 GMT, after hitting an intraday high of $78.50, the highest since Jan. 27.
US West Texas Intermediate crude was up $6.22, or 9.1 percent, at $74.26 after hitting $77.62, its highest level since Jan. 21.
Friday’s gains were the largest intraday moves for both contracts since 2022, after Russia’s invasion of Ukraine caused a spike in energy prices.
Israel said it had targeted Iran’s nuclear facilities, ballistic missile factories and military commanders at the start of what could be a prolonged operation also anticipating Iran’s response.
The National Iranian Oil Refining and Distribution Company said oil refining and storage facilities had not been damaged and continued to operate.
The primary concern was whether the latest developments would affect the Strait of Hormuz, said SEB analyst Ole Hvalbye.
The key waterway had been at risk of impact from increased regional volatility previously but had not been affected so far, Hvalbye said.
‘Oil rally’
There also was no impact so far to oil flow in the region, he added.
About a fifth of the world’s total oil consumption passes through the strait, or some 18 to 19 million barrels per day of oil, condensate and fuel.
Analysts at consultancy Sparta Commodities said any significant crude supply disruptions would lead to sour crude grades being marginally priced out of refineries in favor of light sweets.
Under a worst case scenario, JPMorgan analysts said closing the strait or a retaliatory response from major oil producing countries in the region could lead to oil prices surging to $120 to 130 a barrel, nearly double their current base case forecast.
“The key question now is whether this oil rally will last longer than the weekend or a week—our signal is that there is a lower probability of a full-blown war, and the oil price rally will likely encounter resistance,” said Janiv Shah, analyst at Rystad.
“Fundamentals show nearly all Iranian exports going to China, so Chinese discounted purchases would be most at risk here. OPEC+ spare capacity can provide the stabilizing force,” he added.
Safe havens
In other markets, stocks dived and there was a rush to safe havens, such as gold and the Swiss franc.
Gold, a classic safe haven at times of global uncertainty, rose 1 percent to $3,416 per ounce, bringing it close to the record high of $3,500.05 from April.
Some traders were attracted to the dollar as a haven, with the dollar index up 0.8 percent to 98.50, retracing most of Thursday’s sizeable decline.
Fellow safe haven the Japanese yen fell 0.6 percent to 144.33 per dollar, giving up earlier gains of 0.3 percent.
US Treasuries initially benefited from the rush for safer assets. But as the day wore on, focus turn to the inflationary impact of oil.
US 10-year Treasury yields were last up 2.6 basis points at 4.38 percent, having touched a one-month low of 4.31 percent. Bond yields move inversely to prices.
The latest tensions in the Middle East mean another geopolitical tail risk, at a time when investors are wrestling with major shifts in US trade policies.
“The geopolitical escalation adds another layer of uncertainty to an already fragile sentiment,” said Charu Chanana, chief investment strategist at Saxo, adding that crude oil and safe-haven assets will remain on an upward trajectory if tensions continue to intensify.
