(Bloomberg) -- Oil rose for a second day after Iran fired about 200 ballistic missiles at Israel, drawing a vow of retaliation from Prime Minister Benjamin Netanyahu and raising the risks to crude supplies from the region.
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Global benchmark Brent climbed above $75 a barrel, after briefly spiking more than 5% on Tuesday following the Iranian assault, which was preceded by a warning from the US. Options volatility soared to an 11-month high as traders hedge against the possibility of soaring oil prices.
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Crude’s advance reflects investors pricing in a renewed risk premium for the world’s most important commodity, given the Middle East accounts for about a third of global supplies. Haven assets, including bonds, gold and the US dollar, also climbed on the latest escalation of the conflict.
Although Israel and Iran have been facing off since the outbreak of the war in Gaza against Tehran-backed Hamas almost a year ago, previous spikes have been short-lived in the absence of actual interruptions to oil output. Iran pumped about 3.3 million barrels a day in September, according to a Bloomberg survey.
“While the geopolitical risk premium rose on Tuesday, our tools suggest that this premium remains moderate,” Goldman Sachs analysts including Yulia Zhestkova Grigsby wrote. “As a result, oil prices remain sensitive to supply disruption risks.”
Iran and Israel exchanged attacks earlier this year, with Tehran firing a barrage of missiles and drones in April that was flagged in advance and caused little damage. It was followed a few days later by a limited, retaliatory Israeli strike against Iran. That week, oil ended more than 3% lower.
While many participants have “faded the risk” of supply disruptions, energy infrastructure could become a target for either side, RBC Capital Markets LLC said in a note. Tehran and its proxies “could potentially target energy operations in other parts of the region in order to internationalize the cost if the current crisis devolves into an all-out war,” it added.
Meanwhile, OPEC+ later Wednesday is scheduled to hold an online meeting of a technical panel — the Joint Ministerial Monitoring Committee — to review global oil markets. The group is preparing to revive some of its idled production from December, after initially delaying that plan.
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--With assistance from Weilun Soon.
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