Oil Prices Flat as Traders Await Developments in the Iran-Israel Conflict

Crude oil prices were flat early on Monday morning, as traders await the next development in the ongoing conflict between Israel and Iran following a major spike in prices last week.

After booking the strongest rise in about a year, Brent crude and West Texas Intermediate started this week flat, with Brent trading around $78 a barrel and WTI trading below $75 per barrel.

A big portion of the gains that oil prices made last week came after President Biden said the U.S. had discussed possible targeting of Iran’s oil industry with the government in Tel Aviv. Then Biden said, also on Friday, that he didn’t know how the Israelis would respond to the Iranian attack but “I’d be thinking about other alternatives than striking oil fields,” Bloomberg reported.

Meanwhile, “Profit-taking might have been the cause of the retreat after the price surge last week,” market analyst Tina Teng told Reuters. “However, the oil market will likely continue to face upside pressure due to fears of Israel’s retaliation response to Iran. Geopolitical tensions are now playing a key role in shaping the market trend.”

Indeed, geopolitics has turned into the leading factor for oil prices, prompting Goldman Sachs last week to warn that a war between Israel and Iran could push oil higher by $20 per barrel.

“If you were to see a sustained 1 million barrels per day drop in Iranian production, then you would see a peak boost to oil prices next year of around $20 per barrel,” Daan Struyven, co-head of global commodities research at the investment bank, told CNBC on Friday.

However, Struyven noted that this projection is based on the assumption that the OPEC+ group would not respond to a potential disruption to supply from Iran by boosting production.

In related news, Saudi Arabia raised its oil prices for Asian buyers by more than analysts had expected.