Despite Israel launching new airstrikes on Iran over the weekend, market sentiment eased as investors saw that crucial energy and nuclear facilities were not targeted. This led to a significant drop in oil prices, with Brent crude falling to approximately $73 per barrel and the U.S. WTI crude dropping below $69 per barrel. Safe-haven asset gold also experienced a decline in prices.
On Saturday, Israeli fighter jets targeted military sites within Iran, responding to missile attacks earlier this month. The strikes, however, were more restrained than anticipated. Israel conducted three waves of airstrikes employing over a hundred aircraft, including F-35s, focusing on Iran's air defense systems, missile, and drone production sites, while avoiding nuclear and oil facilities.
The international community had been anxious about further escalation following Iran's initial missile attack on Israel. However, Israel's recent actions suggest a cautious approach, not escalating the conflict by targeting sensitive Iranian infrastructure.
Iran reported the Israeli airstrikes violated international law by targeting radar installations in several provinces, including Tehran. Iran’s response was limited, focusing on achieving a ceasefire in Gaza and Lebanon.
As the geopolitical risk premium fades from oil prices due to Israel's selective targeting, analysts like Saul Kavonic from MST Marquee noted the limited nature of the strikes offers hope for reduced hostilities in the Middle East, provided Iran does not retaliate soon.
Jay Hatfield, CEO of Infrastructure Capital Advisors, stated that the strike's avoidance of energy infrastructure might ease fears of direct conflict with Iran, predicting oil prices could rebound as winter and travel season approaches.
However, Phil Flynn, a senior market analyst with Price Futures Group, cautioned that concerns about Persian Gulf oil supplies are not entirely over. Although immediate threats have been postponed, he believes potential future disruptions cannot be dismissed, with Iran potentially mobilizing proxies for a response.
