The recent tensions between Iran and Israel have caused fluctuations in the oil market, with U.S. oil futures closing at $83.14 a barrel, the lowest since late March. The escalation began with Israel’s strike on an Iranian diplomatic compound in Damascus on April 1, followed by Iran’s missile and drone barrage against Israel. Despite fears of further escalation, prices settled only slightly higher after Israel’s limited retaliatory strike. Investors now believe that the risk of disruption to oil flows due to Iran-Israel tensions has been erased, as both countries seem uninterested in escalating the situation.
International pressure on Israel to show restraint seems to have paid off, as the International Atomic Energy Agency confirmed that there was no damage to Iran’s nuclear sites. Analysts believe the cycle of escalation between the two countries may be over, as direct attacks against each other seem unlikely to continue. Despite the recent de-escalation, lingering concerns remain regarding the Strait of Hormuz, a critical waterway for global oil transport. The potential for major disruption in the strait could cause global benchmark Brent crude oil prices to surge to $130 a barrel, highlighting the significance of maintaining stability in the region to avoid impacting oil supplies.