Market Analysis

Oil prices surged by $3 per barrel on Friday following reports of Israeli missile strikes on a site in Iran, raising concerns about potential disruptions in Middle East oil supply.

The benchmark contracts initially rose over $3 before slightly pulling back. At 0200 GMT, Brent futures were up $2.63, or 3%, at $89.74 per barrel, while the most active U.S. West Texas Intermediate contract climbed $2.56, or 3.1%, to $84.66 per barrel.

According to U.S. news outlet ABC News, a U.S. official confirmed Israeli missile strikes in Iran.

Iran's Fars news agency reported explosions at an airport in Isafahan, Iran, though the cause remained unknown. CNN noted several flights were diverted over Iranian airspace.

Warren Patterson, head of commodities strategy at ING, expressed concern in a note, stating that if the reports were accurate, fears of further escalation and potential oil supply disruptions would intensify.

The reports sparked worries that Israel had responded to Iran's recent drone and missile attack, which occurred over the previous weekend.

Investors had been closely monitoring Israel's reaction to the April 13 Iranian drone attacks. The geopolitical risk premium in oil prices had been diminishing earlier in the week due to expectations that any Israeli retaliation would be tempered by international pressure.

In terms of global crude oil supply, Venezuela lost a crucial U.S. license allowing it to export oil worldwide. Additionally, the U.S. imposed sanctions on Iran, targeting its unmanned aerial vehicle following the drone strike on Israel last weekend. However, these sanctions exempted Iran's oil industry.

Paraphrasing text from "Investing" all rights reserved by the original author.