Iran's attack on Israel has intensified market concerns about oil supply, but analysts believe that this event is unlikely to cause a long-term and severe disruption in global crude oil supply.

On Tuesday, oil prices rose by over 5% at one point to reach an intra-day high, but market sentiment gradually calmed down, leading to a drop in oil prices from the intra-day high.

The price of American West Texas Intermediate (WTI) crude oil futures is now at $70.3 per barrel, with a highest trading price of $71.94. Brent crude oil futures closed at $74.53 per barrel, up 2.6%.

Analysts believe that the likelihood of Iran continuing retaliatory actions is small, so Israel's response will determine the trend of oil prices.

What happened?

According to Xinhua News Agency, Iranian state television reported on the 1st that Iran had launched multiple missiles at Israel. Subsequently, according to CCTV News, Commander Salami of the Islamic Revolutionary Guard Corps of Iran stated that in the action on the night of October 1, Iran launched 200 missiles at Israel.

According to CCTV International News, Iranian Foreign Minister Araghchi posted on social media in the early morning of October 2nd, warning Israel not to retaliate against Iran's missile attacks. Araghchi stated that Iran's military action on the evening of the 1st was carried out in accordance with Article 51 of the UN Charter under the right of self-defense. He emphasized that Iran's military action has ended unless Israel decides to take further retaliatory action. If Israel retaliates, Iran's response will be "fiercer and more powerful".

Subsequently, Israeli Defense Forces spokesperson Hagar announced that there is currently no threat from Iran, indicating that the attack has ended.

Regarding Israel, according to CCTV International News, late at night on October 1st local time, Israeli Prime Minister Benjamin Netanyahu made his first statement after Iran launched missiles at Israel: 'Iran has made a big mistake tonight and will pay the price for it.' According to previous reports by Israeli media, when the Iranian missiles were launched, Netanyahu was urgently convening a meeting of the Israeli Security Cabinet in a shelter.

In April, according to Xinhua News Agency, Israel bombed the Iranian embassy consulate in Syria, resulting in at least 7 deaths. In retaliation, Iran launched a large-scale missile attack on Israel on the evening of April 13th local time.

In the long term, Israel's response will determine the trend of oil prices.

Geopolitical tensions intensify, increasing market concerns about oil supply. The escalating geopolitical conflicts may limit Iran's crude oil exports and drive up global prices.

Iran is one of the world's top ten oil producing countries. According to the monthly report of the Organization of the Petroleum Exporting Countries, in August of this year, Iran's oil production was 3.277 million barrels per day. The oil market estimates that Iran's exports account for approximately half of this.

MarketWatch indicates that investors are concerned that oil exports in the region may face further restrictions or constraints. One major concern of the escalating tension between Iran and Israel is 'missiles or other military equipment flying over other countries, with collateral damage potentially involving other countries in the conflict.'

However, in the long term, Israel's response will determine the trend of oil prices.

"To have a substantial and lasting impact on the market, a conflict needs to escalate into a broader war and have a significant effect on the global economy by restricting oil supply or increasing transportation costs, which could disrupt the expectations of rapid interest rate cuts in most developed markets." Ballinger Group forex market analyst Kyle Chapman wrote in a report published before the Iranian attacks.

He added that neither side has a strong motivation to launch a "regionally destabilizing war."

BCA's Chief Strategy Officer Marko Papic also believes that there is little possibility of Iran continuing retaliations, and the global financial markets are unlikely to be affected. However, oil prices may still show an upward trend:

"It's just not because of geopolitics, what's changing is the global macro environment."

Editor/Lambor