Oil prices dropped sharply on Monday, with Brent crude and West Texas Intermediate (WTI) futures tumbling over 4%, as markets reacted to Israeli airstrikes over the weekend that avoided significant energy infrastructure in Iran.
The Brent crude benchmark fell by 4.27% to $72.80 per barrel, while WTI futures declined by 4.45% to $68.60 per barrel as of 08:30 Bulgarian time.
The sharp decline in prices was driven by the relief that Israeli airstrikes, launched in response to Iranian missile attacks earlier this month, targeted military installations instead of energy assets such as oil fields or nuclear facilities.
Market fears of a disruption in Middle Eastern oil supplies eased as a result, contributing to the steep drop in oil futures. Although the airstrikes heightened geopolitical tensions, the restraint shown by Israel sparked optimism for a potential de-escalation in the region.
The recent volatility in oil prices has been influenced by the ongoing instability in the Middle East, with concerns over potential supply disruptions keeping the market on edge.
However, Israel’s measured response over the weekend helped quell broader fears about energy threats, providing a sense of reassurance for traders.
Further compounding the pressure on oil prices were growing concerns over demand in the world’s largest oil-consuming nation, China.
Economic data released over the weekend showed a decline in industrial profits, raising doubts about the effectiveness of the government’s recent efforts to stimulate growth.
The slowdown in China’s economy, coupled with its significant role in global oil consumption, has created additional uncertainties in the energy market.
Looking ahead, attention is turning to OPEC+ and its upcoming policy discussions. The oil cartel and its allies are scheduled to meet soon, with speculation mounting about a possible increase in production from December onwards. A decision to raise production could weigh on prices further, especially amid the current concerns about demand.
The impending U.S. presidential election, now less than two weeks away, is also creating unease in the energy sector.
The election outcome could significantly impact energy policies, including decisions on domestic oil production and sanctions that affect oil-exporting countries such as Iran.
As a result, market participants are closely watching the political landscape in the United States for any signs that may influence energy strategies and regulations.
Despite the recent dip, analysts caution that oil prices could remain volatile in the coming weeks due to the multitude of factors at play, including geopolitical tensions, demand uncertainties, and OPEC+ policy decisions.
The Middle East remains a focal point for energy markets, and any escalation in hostilities could rapidly change the outlook for oil supplies.
For now, the airstrikes’ limited impact on Iran’s energy infrastructure has provided a temporary respite for oil markets, allowing traders to turn their attention back to broader economic indicators and policy decisions that will shape future demand and supply dynamics.