Following Iran’s missile strike on Israel, oil prices surged past $75 per barrel, marking a significant escalation in the ongoing Middle Eastern conflict.
On Tuesday evening, Brent crude’s one-month futures contracts were trading at $70 a barrel when the attack commenced. Iran, a dominant regional power and supporter of the militant group Hezbollah, initiated the assault.
This uptick in Brent crude prices positively impacted British oil companies, with shares of Shell and BP increasing by 2.8% and 2.7% respectively on Wednesday morning. Meanwhile, gold prices experienced a slight decline of 0.3%, settling at $2,654 an ounce as the stronger dollar countered safe haven buying.
Prior to the missile attack, oil prices had reached a two-week low, influenced by sluggish global demand and expectations of rising supply, which had overshadowed regional conflict concerns.
Opec+ ministers are scheduled to convene on Wednesday to evaluate the current market conditions, but no policy shifts are anticipated. The Opec+ coalition consists of 12 members from the Organisation of Petroleum Exporting Countries and additional oil-producing nations led by Russia.
At a previous meeting in June, Opec+ outlined its strategy to gradually eliminate some of the production limitations established at the end of 2022. Starting in December, an increase in oil output by 180,000 barrels per day is planned each month.
The production cuts implemented by the cartel in late 2022 amounted to 5.86 million barrels per day, representing about 5.7% of worldwide demand. These measures have been crucial in stabilizing oil prices amidst fluctuating demand.
During the Covid-19 pandemic, oil prices plummeted to around $20 a barrel, but they soared to nearly $120 per barrel in 2022 following Russia’s incursion into Ukraine.
Recently, Brent crude prices had dropped to a low of $69.19 due to increasing production levels in the United States.