The future of oil prices after the Iranian strike on Israel is assessed

“It all depends on how the Israelis react now.”

Oil prices remain stable despite the escalation of conflict in the Middle East. Financial market reactions are more focused on the prospect of rising prices, for example, for oil, which reduces the prospect of lower interest rates in the coming months.

World oil prices traded slightly lower on Monday morning, despite rising tensions in the Middle East over the weekend, Sky News reported.

In Asian trading, international benchmark Brent crude fell nearly 0.4% to $90 a barrel, while U.S. crude futures also fell in price, according to LSEG data.

Market experts said the moves reflected the fact that fears of an Iranian attack on Israel, culminating in a non-lethal drone and missile strike on Saturday, had already been addressed in the previous week.

On Friday, Brent oil rose to almost six-month highs, Sky News notes.

Overall, stock markets across Asia pulled back and the same was expected in Europe later Monday morning as investors worried about how Israel might react to Iran’s moves.

The FTSE 100 index fell about 0.5% in London at the opening bell, reducing the index’s chances of hitting record levels this week.

On Friday, trading closed at 7,999 points – just 12 points below its peak in February 2023.

Analysts note that more and more attention is being paid to what rising oil prices will mean for the global economy.

Since the start of the year, the price of Brent crude has risen 17%, while US crude has risen almost 19%, and there is growing talk that prices will well exceed $100 a barrel if there are no signs of easing tensions .

Iran’s seizure last week of a tanker that Tehran said was linked to Israel has only heightened concerns about the impact on trade.

The impact extends beyond oil to critical supplies of liquefied natural gas (LNG), other commodities and consumer goods, many of which have already been affected by shipping disruptions in the Red Sea due to attacks by Yemen’s Houthi rebels. associated with Iran.

Inflation data this week will show whether higher shipping costs have had any impact, Sky News said.

The additional costs could undermine financial market expectations for lower interest rates, which are widely forecast for this summer following the significant slowdown in price growth seen at the end of the COVID pandemic and then since the outbreak of the conflict in Ukraine.

Commenting on Monday’s oil price reaction to the Iranian attack, Warren Patterson, head of commodity strategy at ING, said: “The attack was largely assessed in the days leading up to it. In addition, the limited damage and the fact that there were no casualties means , that perhaps Israel’s reaction will be more measured. But obviously there is still a lot of uncertainty, and it all depends on how Israel reacts now.”