Oil prices rise as Iran plans retaliation against Israel

Oil prices rose on Friday amid warnings that Iran is planning a revenge strike against Israel.

The threat of escalating tensions sent prices up more than $2 a barrel as traders responded to fears that fresh hostilities in the Middle East could disrupt global oil supplies.

By mid-morning on Friday, the price of Brent crude had risen to $74.64, from $72.31 on Thursday and $70.90 on Tuesday.

The recent jump comes amid reports that Iran is preparing to launch an attack against Israel within days, potentially from Iraqi territory.

In a speech on Thursday, Major General Hossein Salami of Iran’s Revolutionary Guards said Tehran’s retaliation against Israel would be “unimaginable”.

It comes after Israel launched airstrikes on Iran last weekend.

Ashley Kelty, director of research at Panmure Liberum, said: “It seems markets have been too quick to note the war premium for the Middle East and Thursday’s rise reflects this.

“While the impact of the attacks would be on a smaller scale, the potential to draw Iraq into the conflict equation would open up space for future attacks that could damage Iraqi energy infrastructure and disrupt supplies.”

The latest rise partially reversed the long-term downward trend in oil prices, as the cost of a barrel was previously above $90 in April.

A gradual decline over the summer was largely driven by concerns over global oversupply and subdued demand from China’s economic slowdown.

However, while recent rhetoric from Tehran fueled a rally in prices, Ole Hvalbye, commodities analyst at Norwegian investors SEB Research, told Reuters that neither Iran nor Israel would want to start a regional war at large scale.

He said: “Any further response from Iran could remain contained, similar to Israel’s limited strike last weekend, therefore intended primarily as a show of force rather than an invitation to open war.” .

Analysts also warned that future oil prices will be affected by the outcome of the US election, as well as uncertainty related to the OPEC cartel’s decision to increase oil production this month.

“Several international events converged earlier in the month that could see oil markets in for a bumpy ride in early November,” said Mukesh Sahdev of Rystad Energy.

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