Oil prices experienced a significant surge on Thursday, driven by heightened geopolitical tensions in the Middle East, with Brent crude futures surpassing the $75 per barrel mark. West Texas Intermediate (WTI) crude oil saw a remarkable rise of 5.5%, reaching $73.94 per barrel in intraday trading, marking its third consecutive daily increase.
Meanwhile, Brent crude climbed 5.4% to $77.86, extending its upward trajectory into a fifth consecutive day. Experts from D.A. Davidson indicated that the surge in oil prices stems from fears regarding an escalating conflict in the Middle East. Reports surfaced on Tuesday detailing that Iran conducted a missile attack on Israel in retaliation for the recent killing of Hezbollah leader Hassan Nasrallah along with an Iranian commander in Lebanon.
In response, Israeli Prime Minister Benjamin Netanyahu declared that Iran 'made a big mistake' and would 'pay' for the attack, according to recent CNN reports. These developments have sparked concerns that Israel might retaliate by targeting Iran’s oil facilities, as noted in a Thursday report by ING.
Such a course of action could lead oil prices to 'significantly higher' levels, contingent upon the severity of the attack, given that Iran exports nearly 1.7 million barrels of crude oil daily. ING also highlighted the potential ramifications that an assault on oil facilities could have on relations with the US, especially as the country approaches the presidential elections scheduled for next month.
When questioned about whether the US would support Israel in striking Iranian oil facilities, President Joe Biden remarked on Thursday that 'we're in discussion of that,' but added that 'there's nothing going to happen today.' On the operational front, Israel has conducted airstrikes targeting Hezbollah's intelligence headquarters in southern Beirut, according to CNN.
Furthermore, the Organization of the Petroleum Exporting Countries and its allies, referred to as OPEC+, chose to maintain their current production policy during their meeting on Wednesday, as reported by ING. Additionally, reports indicated that Saudi Arabia previously cautioned certain OPEC+ members that oil prices could plummet to as low as $50 per barrel if they fail to adhere to their production targets.
This serves as a stark warning that a failure to comply with the production agreements could instigate a price war led by the Saudis..