Analysts predict a rise in oil prices on Monday after Iran's attack on Israel over the weekend, but further gains may depend on the response chosen by Israel and the West.
Iran launched drones and explosive missiles at Israel late Saturday in retaliation for a suspected Israeli attack on its consulate in Syria on April 1st, marking the first direct assault on Israeli territory and raising fears of a broader regional conflict.
Concerns over Iran's reaction to the attack on its embassy complex in Damascus boosted oil prices last week, assisting in the rise of the Brent crude benchmark to $92.18 a barrel on Friday, its highest level since October.
The settlement price that day rose by 71 cents to $90.45, while West Texas Intermediate (WTI) futures in the U.S. increased by 64 cents to $85.66, noting that trading is paused on Sunday.
Tamas Varga from PVM oil brokerage said, "Stronger prices can be reasonably expected as trading resumes." However, he added, "There has been no impact on production yet, and Iran has said the matter could be considered closed... Any initial market reaction, no matter how fierce and painful, could be short-lived unless there is a tangible disruption to supplies from the region"; according to Reuters.
Giovanni Staunovo, an analyst at UBS Bank, commented, "Oil prices may rise at the opening because this is the first time Iran has struck Israel from its territory. How long any rebound will last... will depend on the Israeli response."
Iran significantly boosted its oil exports - its main source of revenue - under the Biden administration, following a sharp decline during the presidency of Biden's predecessor,
Donald Trump, who Biden will face in a rematch in the upcoming November presidential elections.
The Biden administration claims it does not encourage Iran to increase its exports and is enforcing sanctions.
A reduction in Iranian exports could lead to further increases in oil prices and gasoline costs in the United States, a politically sensitive issue ahead of elections.
Another factor to watch is any impact on shipping through the Strait of Hormuz, through which about a fifth of the world's daily oil consumption passes.
The commander of the Iranian Revolutionary Guard's navy said on Tuesday that Tehran could close the strait if deemed necessary. Earlier on Saturday, the Islamic Republic News Agency reported that a Revolutionary Guard helicopter boarded the MSC ship flying the Portuguese flag that entered Iranian waters.
Ole Hansen of Saxo Bank mentioned, "Crude oil prices have already included a risk premium, and its extent depends almost exclusively on developments near Iran around the Strait of Hormuz."