Oil prices touched red during trade on Monday, as investors turned cautious after the conflict between Iran and Israel escalated majorly over the weekend. Crude prices slipped marginally by 0.24 per cent in the morning, LSEG data revealed.
Brent future for June delivery declined 0.2 per cent to touch $90.25 per barrel, while West Texas Intermediate (WTI) futures for May delivery fell 0.4 per cent to reach $85.33 per barrel around 8 AM IST, reported Reuters. Notably, Iran launched an attack involving over 300 missiles and drones on Israel on Saturday, while the Israeli government said that the attack caused limited damage.
The conflict, however, raised concerns about the possible escalation of the conflict in a full-blown regional issue through the region, in turn, impacting oil prices and supply. The report quoted Warren Patterson, head of commodities strategy, ING, and said, “An attack was largely priced in the days leading up to it. Also, the limited damage and the fact that there was no loss of life means that maybe Israel's response will be more measured. But clearly, there is still plenty of uncertainty and it all depends on how Israel now responds."
Analysts at ANZ Research added that the attack on Iran’s embassy in Syria and the country’s retaliation has caused widespread concern in the whole region. “However, we don't expect an immediate reaction in crude oil prices given ample spare capacity and an already elevated geopolitical risk premium,” they said.
Currently, Iran has a production capacity of more than 3 million barrels per day (bpd) of crude oil. ING in a note said that the stringent oil sanctions and a possible target on Iran’s energy infrastructure from Israel could worsen supply woes. The body also noted that the US could come to the rescue and release more oil from its reserves and the OPEC continued to have a spare production capacity of more than 5 million bpd.
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