Oil Rally Pauses as Market Awaits Israel’s Response to Iranian Attacks
The recent surge in oil prices took a breather on Tuesday as the market closely monitored Israel’s potential retaliation following last week’s rocket attacks from Iran. Concerns over a broader Middle East conflict had initially driven oil prices higher, with both Brent and U.S. West Texas Intermediate (WTI) crude reaching their highest levels since late August.
By 1014 GMT, Brent crude futures had dropped $1.62, or 2%, to $79.31 per barrel, while WTI futures declined $1.60, or 2.07%, to $75.54 a barrel. This follows a more than 3% rise on Monday, with Brent briefly surpassing the $80 mark.
Geopolitical Tensions and Market Volatility
The recent rally in oil prices began after Iran launched missile strikes against Israel on October 1, leading to fears of a potential disruption in Middle Eastern oil supplies. Israel has since vowed retaliation, keeping market participants on edge. However, with no immediate follow-up action from Israel, analysts like Tamas Varga of PVM caution that the price surge may be difficult to sustain without actual supply disruptions.
Panmure Liberum analyst Ashley Kelty noted that while prices are likely to remain volatile, profit-taking could put pressure on the market in the absence of new developments in the Middle East.
China’s Economic Outlook and U.S. Storms Add to Market Dynamics
Beyond the geopolitical landscape, oil prices also faced downward pressure from concerns over economic growth in China, the world’s largest oil importer. On Tuesday, China’s announcement that it was confident in meeting its growth target failed to include the stronger fiscal measures investors had anticipated, dampening market sentiment.
In the U.S., Hurricane Milton’s progression into a Category 5 storm prompted the shutdown of at least one oil platform in the Gulf of Mexico, adding another layer of uncertainty to the supply outlook.
Market participants are also looking ahead to U.S. crude inventory data, with expectations of a 1.9 million-barrel increase for the week ended October 4. The American Petroleum Institute (API) is set to release its inventory report on Tuesday, followed by the official data from the Energy Information Administration (EIA) on Wednesday. These reports will provide further insight into the state of U.S. oil supplies as traders assess the market’s next moves.
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