Following statements regarding discussions of a potential retaliatory attack by Israel on Iran’s oil facilities, the price of Brent crude oil increased by 6% and saw its highest weekly gain since January.

Despite the oil prices rising by more than 4% after President Joe Biden’s remarks on a possible retaliatory attack by Israel on Iran’s oil facilities, experts argue that if such an attack occurs, the price hikes will not be permanent. After Iran responded to Israeli attacks that killed Hamas leader Ismail Haniyeh, Hezbollah leader Hassan Nasrallah, and Iranian General Abbas Nilfuran with dozens of ballistic missiles on Israel on October 1, oil prices started to climb. On the same day, following Israeli Prime Minister Benjamin Netanyahu’s statement on social media that Iran had made a “big mistake” with the missile attack and would pay the price, Brent crude oil gained over 3% to close the day at $74.27. However, Biden’s statement on October 3 leaving the door open to a potential Israeli attack on Iran’s oil facilities by saying, “We are discussing it right now,” continued Brent crude oil’s climb, with barrel prices rising over 4% to reach $77.83 and closing the day at $77.44. Although Biden’s remarks on October 4 that, “If I were them (Israel), I would consider alternatives to oil fields,” limited the upward movement of prices, concerns about conflicts in the Middle East, where most global oil reserves are located, causing disruptions in the supply, maintained its dominance in the oil market. Following these statements, Brent crude oil closed the week ending October 4 with a 0.6% increase at $77.88. West Texas Intermediate (WTI) crude oil barrels also found buyers with over a 0.9% increase at $74.06. On a weekly basis, Brent crude oil recorded its highest weekly gain since January with an approximately 6% increase. WTI crude oil barrels also saw a weekly increase of over 5%, showing the largest gain since August 2023.

“AN ATTACK ON IRAN’S OIL INFRASTRUCTURE WOULD NOT HAVE A PERMANENT EFFECT ON OIL PRICES”

Alberic Mongrenier, Delegate Member of the European Energy Security Initiative, stated in an evaluation with an AA correspondent that an attack by Israel on Iran’s oil facilities would not have a long-term impact on global oil prices. Mongrenier noted that in the event of a possible attack, only short-term price increases would occur, saying, “I do not believe that an attack on Iran’s oil infrastructure will have a lasting effect on global oil prices. There may certainly be a short-term ’emotional’ price increase, but OPEC and other producers have additional capacity to quickly recover Iranian oil.” Stressing that investors should follow the tactics of the OPEC and some non-OPEC producing countries forming the OPEC+ group in the future, Mongrenier said, “The OPEC+ group has been cutting production for some time to support oil prices, but this has not had a significant effect. If Iran loses export capacity and the group decides not to compensate for this gap, prices may increase.” In case such a situation occurs, Mongrenier pointed out that other producers would be able to cover this gap, thus claiming that there would be no lasting price hikes.

“OIL PRICES CAN RISE WELL ABOVE $100, BUT A DROP IS LIKELY”

Bob McNally, President of the Washington-based consulting firm Rapidan Energy Group, stated that if Israel were to attack Iran’s oil refineries, crude oil prices would rise, but this situation would not last long. McNally emphasized that damage to energy facilities in the Gulf region or prolonged interruptions in crude oil, refined products, and LNG flows from the Arabian Gulf would adversely affect an already fragile economy, saying, “Depending on the extent of the damage or interruption, crude oil prices could rise well above $100 per barrel, but with the economic downturn caused by weakening demand, a drop in prices is likely.” McNally also underlined that investors should pay attention to not only the targets Israel chooses for retaliation but also the targets Iran may choose afterward, warning, “Israel’s civilian deaths will sharply escalate the conflict.”