Yahoo Finance Oil Holds Steady Amid Wait for Israel’s Response to Iran Attack
(Bloomberg) -- Oil fluctuated in a narrow range as risk-off sentiment prevailed in broader markets and traders monitored Israel’s response to an unprecedented attack by Iran.
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West Texas Intermediate settled little changed above $85 a barrel as a stronger dollar pressured commodities priced in the currency. Prices swung between gains and losses of less than 1% throughout the session.
Top Israeli military officials said their country has no choice but to respond to Tehran’s weekend strike, even as Western and Arab nations try to convince Prime Minister Benjamin Netanyahu that an aggressive reaction would harm Israel’s interests. The Middle East accounts for about a third of global crude supply.
The Israeli officials’ comments about retaliation led to a fresh round of bidding in the oil options market late Monday. Bullish calls on global benchmark Brent crude are trading at the biggest premium to bearish puts since October, and the volume of contracts that profit from higher prices set a fresh record.
Unless the attacks result in escalation or lead to the “destruction of oil-producing components, each attack will pull less on prices,” said Dennis Kissler, senior vice president at BOK Financial. “Still, a geopolitical risk premium of approximately $7 to $10 in crude will most likely remain until there are signs of de-escalation.”
Federal Reserve Chair Jerome Powell threw additional choppiness into the market after signaling that the Fed may hold rates higher for longer to combat sticky inflation. The S&P 500 spiked on Powell’s comments, but oil is moving more in line with news from the Middle East, said Rohan Reddy, director of research at Global X Management. He noted that Powell’s newest statement hasn’t deviated from his existing message around rate cuts.
In another sign that crude may face challenges building on its 19% advance this year, one South Korean refiner will lower operating rates from this month as a result of recent gains in oil, people with knowledge of the matter said on Tuesday.
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