Oil drops on Monday

Oil dropped on Monday amidst rising tension between Iran and Israel, causing limited damage and minimal casualties, Reuters reported on Monday.

Brent futures for June delivery fell by 0.5 per cent to $89.95 a barrel, while West Texas Intermediate (WTI) futures for May delivery were down 0.6 per cent at $85.14 a barrel by 0630 GMT.

Warren Patterson, head of commodities strategy at ING, noted that the attack was largely anticipated, with limited damage suggesting a measured Israeli response. However, uncertainties remain about Israel’s next actions.

Iran, a major OPEC+ producer with over 3 million barrels per day (bpd) output, faces supply risks from potential oil sanctions and Israeli strikes on energy infrastructure.

While significant supply loss could prompt the release of crude from strategic reserves, OPEC+ holds over 5 million bpd spare production capacity.

Oil prices rose ahead of the attack but analysts expect lasting effects only with substantial supply disruptions, such as constraints in the Strait of Hormuz. So far, the Israel war on Gaza has had minimal impact on the oil supply.

Analysts predict oil prices could fall back sharply if tensions de-escalate, but a direct conflict between Iran and Israel could push prices above $100 per barrel.