By Scott DiSavino
Oil prices skyrocketed by 4% on Tuesday as reports surfaced of Iran's potential missile attack on Israel. Brent crude futures surged $2.50 to $74.20 a barrel, while U.S. WTI crude rose $2.54 to $70.71 by 11:50 a.m. EDT.
Israel's elite units initiated limited ground raids into Lebanon, prompting Hezbollah to fire missiles at Tel Aviv. The U.S. issued warnings of a possible ballistic missile attack by Iran, escalating tensions in the Middle East.
The threat of a broader conflict involving Iran and the U.S. raised concerns among investors. Independent political risk strategist Clay Seigle highlighted the potential impact on Iran's oil assets if Israel were to retaliate.
Prior to the missile threat, the oil market was trading near a two-week low due to concerns over increased supplies and weak global demand. Meanwhile, the OPEC+ group plans to raise output starting in December, further weighing on prices.
The impending recovery of Libyan oil production added bearish pressure, while factors like Chinese stimulus and U.S. oil demand growth provided some support to prices.
In the U.S., weekly oil storage data is awaited from the American Petroleum Institute and the Energy Information Administration. Analysts predict a withdrawal of 2.1 million barrels, marking the third consecutive week of decline.
Analysis:
The potential missile attack from Iran on Israel has sparked a significant surge in oil prices, with Brent crude hitting $74.20 a barrel. This development has raised concerns about a broader conflict in the Middle East, impacting global oil supply chains. Investors are closely monitoring the situation for further escalation and its potential effects on oil prices and market stability. The upcoming OPEC+ meeting and U.S. oil inventory data will provide additional insights into the market's direction in the coming weeks.