‘It all depends on how Israel responds’: Oil prices steady despite escalation in Middle East conflict

Global oil prices were trading lower on Monday, despite a weekend dominated by rising tensions in the Middle East.

International benchmark Brent crude was down by 1% at $89 a barrel while US crude was also on the slide, according to LSEG data.

Market experts said the moves reflected the fact that worries over an Iranian attack on Israel, which culminated in a non-deadly strike using drones and missiles on Saturday, had already been priced in the previous week.

Follow latest: Israeli war cabinet ‘favours response’ to Iran attack but is split on scale and timing

Brent rose to near six-month highs on Friday.

More widely, stock markets across Asia fell back as investors fretted over how Israel might respond to Iran’s move.

The FTSE 100 in London fell by 0.5% in early trading, denting chances for the index to hit record levels this week, but later fought back to be largely flat by lunchtime.

It closed Friday on 7,999 points – just 12 shy of its February 2023 peak.

Analysts said there was a growing focus on what rising oil costs would mean for the global economy.

Brent is 17% up in the year to date while US crude is almost 19% higher and talk is growing that figures way above $100 a barrel are likely if there is no sign of an easing of tensions.

Iran’s seizure of a tanker last week, which it claimed had links to Israel, only served to stoke jitters over consequences for trade.

They do not extend just to oil but crucial shipments of liquefied natural gas (LNG), other commodities and consumer goods, many already affected by disruption to shipping in the Red Sea due to attacks by Houthi rebels linked to Iran.

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Inflation data this week will show whether there has been any impact from rising shipping costs.

Extra costs risk damaging financial market expectations for interest rate cuts, widely forecast for this summer following a major easing in the pace of price growth witnessed at the end of the COVID pandemic and, later, after Russia’s invasion of Ukraine.

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Commenting on Monday’s oil price response to Iran’s attack, Warren Patterson, head of commodities strategy at ING, said: “An attack was largely priced in the days leading up to it.

“Also the limited damage and the fact that there was no loss of life means that maybe Israel’s response will be more measured.

“But clearly, there is still plenty of uncertainty and it all depends on how Israel now responds.”

‘It all depends on how Israel responds’: Oil prices steady despite escalation in Middle East conflict

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