Oil prices end at highest in a week as Iran launches missile attack on Israel

By Myra P. Saefong and William Watts

WTI, Brent oil settle below session highs

Oil futures settled at their highest in a week on Tuesday after the Israel Defense Forces said Iran launched a missile attack on Israel, in what is considered to be a significant escalation of tensions in the Middle East that may threaten global crude supplies from the region.

The move comes after a senior White House official said earlier Tuesday there were "indications that Iran is preparing to imminently launch a ballistic missile attack against Israel." Israel had earlier started military operations in southern Lebanon in its latest offensive against Iran-backed militant group Hezbollah.

Price moves

West Texas Intermediate crude CL00 for November delivery CL.1 CLX24 rose $1.66, or 2.4%, to settle at $69.83 a barrel on the New York Mercantile Exchange after trading as high as $71.94. December Brent crude BRN00 BRNZ24, the global benchmark, climbed $1.86, or 2.6%, to settle at $73.56 a barrel on ICE Futures Europe. Brent, as well as WTI, settled at their highest since Sept. 24, according to Dow Jones Market Data.November gasoline RBX24 added 1.6% to $1.97 a gallon, while November heating oil HOX24 rose 0.9% to $2.17 a gallon.Natural gas for November delivery NGX24 settled at $2.90 per million British thermal units, down 0.9%.

Market drivers

The Israel Defense Forces said Tuesday that Israeli civilians were in bomb shelters after rockets from Iran were fired at Israel. The IDF said about 10 million civilians were the "targets of Iranian projectiles."

The news follows an earlier warning from the Biden administration, which said the U.S. had received "indications that Iran is preparing to imminently launch a ballistic missile attack against Israel," a senior White House official told MarketWatch on Tuesday morning. "We are actively supporting defensive preparations to defend Israel against this attack. A direct military attack from Iran against Israel will carry severe consequences for Iran."

Read: What Iran's missile attack on Israel means for oil prices

The news has "shaken the bears and hedge funds out of their complacency," said Phil Flynn, senior market analyst at the Price Futures Group.

Following an attack by Iran, "it's possible that Israel will respond and make good on its threats to take out Iran refining and oil-production facilities," he said, ahead of the IDF news of a missile attack on Israel.

Iran produces about 3.2 million barrels per day of crude oil and perhaps 50% of that gets exported, so "if Israel knocks out some of Iran's capacity, oil markets would have to contend with reduced spare capacity in the marketplace" and a loss of 3.2 million barrels a day in a worst-case scenario, said Stewart Glickman, deputy research director at CFRA Research.

That would be "pretty material to the global market," said Glickman.

WTI and Brent had posted losses for September and the third quarter, unable to overcome worries over the outlook for demand and struggling to find a footing even after a large interest-rate cut by the U.S. Federal Reserve and the unveiling of a major stimulus program by China.

Meanwhile, the Organization of the Petroleum Exporting Countries and its allies, known together as OPEC+, is expected to proceed with a plan to begin unwinding some production cuts in December. A committee meeting of OPEC+ officials on Wednesday isn't expected to produce any major announcements.

Also read: AI and crypto use lots of energy. Nuclear power and uranium look like the perfect fix.

Robert Schroeder contributed.

-Myra P. Saefong -William Watts

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10-01-24 1535ET

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