Oil prices turn higher as Iran may enter the Middle East fray

By Myra P. Saefong and William Watts

U.S. has 'indications' of imminent Iran missile strike on Israel

Oil futures turned sharply higher in Tuesday dealings after the U.S. warned of a potential missile attack by Iran on Israel in what would be a significant escalation of tensions in the Middle East that would threaten global crude supplies from the region.

Israel had started operations in southern Lebanon in its latest offensive against Iran-backed Hezbollah.

See also: Iran preparing imminent missile attack on Israel, U.S. warns, pledging 'severe consequences'

Price moves

West Texas Intermediate crude CL00 for November delivery CL.1 CLX24 rose $1.91, or 2.8%, to $70.08 a barrel on the New York Mercantile Exchange after trading as low as $66.33.December Brent crude BRN00 BRNZ24, the global benchmark, was up $1.96, or 2.7%, at $73.66 a barrel on ICE Futures Europe.November gasoline RBX24 added 1.6% to $1.9652 a gallon, while November heating oil HOX24 rose 1.6% to $2.1891 a gallon.Natural gas for November delivery NGX24 traded at $2.91 per million British thermal units, down 0.4%.

Market drivers

The U.S. has "indications that Iran is preparing to imminently launch a ballistic missile attack against Israel," a senior White House official told MarketWatch. "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."

The news has "shaken the bears and hedge funds out of their compliancy," said Phil Flynn, senior market analyst at The Price Futures Group. "If Iran attacks, it's possible that Israel will respond and make good on its threats to take out Iran refining and oil productions facilities."

An attack would be seen as a response to the killing of a high-ranking Hezbollah leader over the weekend, which has been blamed on Israel.

WTI and Brent had posted losses for September and the third quarter, unable to overcome worries over the outlook for demand, struggling to find a footing even after a large 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.

Robert Schroeder contributed.

-Myra P. Saefong -William Watts

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10-01-24 1031ET

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