Oil prices declined as Israel's restrained response to Iran reduced fears of an escalation, calming market concerns over potential energy disruptions.
Crude oil prices began the week with a loss, after Israel’s retaliatory strike against Iran failed to inflict substantial enough damage, according to the Iranian side, thus reducing the risk of another flare-up in violence. “The more limited nature of the strikes, including avoiding oil infrastructure, have raised hopes for a de-escalatory pathway, which has seen the risk premium come off a few dollars a barrel,” Saul Kavonic, energy analyst with MST Marquee, told Reuters.
“The more targeted response from Israel leaves the door open for de-escalation and clearly the price action in oil this morning suggests the market is of the same view,” ING’s Warren Patterson and Ewa Manthey said in a note. “While it is still unclear if or how Iran may retaliate, the government has downplayed the damage caused by Israel’s response.” A perception of surplus supply and lackluster demand is also contributing to the bearish sentiment among oil traders.
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