Oil Prices Surge Following Iranian Missile Attack on Israel

Oil prices surged on Wednesday, building on the previous session’s sharp gains after Iran launched a missile attack on Israel, escalating tensions and potentially disrupting crude output from the region.

By 04:35 ET (08.35 GMT), U.S. crude futures were up 2.1% at $71.27 per barrel, while Brent contracts climbed 1.7% to $74.97 per barrel.

Crude Soars After Iranian Missile Attack on Israel

Both benchmarks saw more than 5% gains on Tuesday, marking Iran’s largest military response against Israel in retaliation for the death of Iran-backed Hezbollah leader Hassan Nasrallah and Israel’s ground forces entering south Lebanon.

Iran claimed the attack was concluded unless further provoked, but Israel warned of “vast destruction” in response, raising concerns about U.S. involvement in the conflict.

Analysts at RBC Capital Markets noted that many market participants have previously dismissed the likelihood of significant supply disruptions despite the ongoing one-year conflict, with Iranian exports nearing six-year highs at 1.7 million barrels per day.

According to RBC, while Iran has not repeated the 2019 attacks on energy infrastructure, it could target operations elsewhere in the region if the conflict escalates.

ING analysts noted that an escalation from Israel could involve targeting Iranian nuclear sites and energy infrastructure, increasing the risk premium in the oil market.

OPEC+ Unlikely to Change Output

The Organization of Petroleum Exporting Countries and allies (OPEC+) are set to meet later to review market conditions, with expectations of no significant output changes.

The group plans to increase production by 180,000 barrels per day starting in December, and due to prior agreements on cuts until late November, analysts do not foresee alterations to the output policy.

U.S. Crude Inventories Fall – API

U.S. crude inventories fell by approximately 1.46 million barrels for the week ending September 27, as reported by the American Petroleum Institute on Tuesday, compared to a drop of 4.3 million barrels the previous week. Economists had anticipated a decline of about 2.1 million barrels.

Gasoline stockpiles rose by about 909,000 barrels, while distillate inventories, which include diesel and heating oil, fell by 2.67 million barrels. The official government inventory report is expected later.