After Israel’s strikes on Iran are restrained, oil prices are expected to decline

Analysts predict that oil prices will drop when trading starts on Monday since Israel’s weekend retaliatory assault on Iran did not impair energy supply and avoided Tehran’s nuclear and oil facilities.

Due to market concern over the magnitude of Israel’s retaliation to the October 1 Iranian missile launch and the upcoming U.S. election, Brent and U.S. West Texas Intermediate oil futures saw a 4% increase last week.

The latest exchange in the growing war between the Middle East foes saw scores of Israeli planes perform three waves of attacks against missile facilities and other locations in western Iran and near Tehran before daybreak on Saturday.

Onyx group head of research Harry Tchilinguirian posted on LinkedIn, “The market can breathe a big sigh of relief; the known unknown that was Israel’s eventual response to Iran has been resolved.”

“Israel attacked after the departure of U.S. Secretary of State Antony Blinken, and the U.S. administration could not have hoped for a better outcome with U.S. elections less than two weeks away.”

Iran said that Israel’s midnight airstrike against Iranian military facilities only caused little damage, downplaying the incident on Saturday.

A Sydney-based IG market analyst named Tony Sycamore stated, “Israel is not attacking oil infrastructure, and reports that Iran won’t respond to the strike remove an element of uncertainty.”

When the crude oil futures markets reopen tomorrow, he added, “it’s very likely we see a ‘buy the rumor, sell the fact’ type reaction.” He also mentioned that WTI may spike back to the $70 a barrel level.

With Brent returning to between $74 and $75 per barrel, Tchilinguirian anticipates that the geopolitical risk premium that was included into oil prices would quickly collapse.

Due to Israel’s apparent limited response to Iran’s strike, UBS commodity expert Giovanni Staunovo also predicts that oil prices will be lower on Monday.

“But I would expect such downside reaction to be only temporary, as I believe the market didn’t price a large risk premium,” he continued.