Brent slumped below US$73 a barrel and West Texas Intermediate sunk near US$68. Israeli fighter planes struck military targets across Iran on Saturday, delivering on a vow to retaliate for a missile barrage at the start of the month, though the attack was more restrained than many had expected.
The strike avoided oil, nuclear and civilian infrastructure sites, keeping with a request from US president Joe Biden’s administration. Iranian state media said the country’s oil industry activities were working normally, and the country didn’t immediately vow to respond.
Oil has been buffeted by geopolitical risks in the Middle East, ample supply and lackluster demand growth in China. Profits at the nation’s industrial firms over the weekend highlighted the weak outlook for the world’s biggest crude importer, despite recent government stimulus.
Israel’s “retaliation on Saturday was mostly viewed as underwhelming and proportionate,” said Harry Tchilinguirian, group head of research at Onyx Capital Group. “Poor macroeconomic realities centred around China will take over the narrative again to push the oil price lower.”
Market metrics, however, still show traders remain on edge. A gauge of implied volatility for Brent is hovering near the highest in a year, and options are still retaining their bullish hue with calls — which profits buyers when prices rise — keeping their premium over the opposite puts.
There’s also higher-than-usual volumes of crude contracts changing hands, with over 125,000 lots of Brent by 6.50am in Singapore.