Oil prices down on Monday as Israel-Iran conflict doesn’t impair oil flows
Oil prices edged down on Monday, after surging 7% on Friday, as renewed military strikes by Israel and Iran over the weekend left oil production and export facilities unaffected.
Brent futures were down 58 cents, or 0.8%, to $73.65 a barrel by 0900 GMT, while U.S. WTI futures were off 51 cents or 0.7%, to $72.47.
Both benchmarks jumped more than $4 a barrel in Asian trading before giving back gains. They settled 7% higher on Friday, having surged more than 13% during the session to their highest levels since January.
“It all boils down to how the conflict escalates around energy flows,” said Harry Tchilinguirian, group head of research at Onyx Capital Group. “So far, production capacity and export capacity have been spared and there hasn’t been any effort on the part of Iran to impair flows through the Strait of Hormuz.”
Iranian missiles struck Israel’s Tel Aviv and the port city of Haifa on Monday, destroying homes and fuelling concerns among world leaders at this week’s G7 meeting that the conflict could widen.
An exchange of strikes between Israel and Iran on Sunday resulted in civilian casualties, with both militaries urging civilians on the opposing side to take precautions against further attacks.
STRAIT OF HORMUZ IN FOCUS
A key question is whether the conflict will lead to disruptions in the Strait of Hormuz.
About a fifth of the world’s total oil consumption, or some 18 to 19 million barrels per day (bpd) of oil, condensate and fuel, passes through the strait.
“If Iranian crude exports are disrupted, Chinese refiners, the sole buyers of Iranian barrels, would need to seek alternative grades from other Middle Eastern countries and Russian crudes,” Richard Joswick, head of near-term oil analysis at S&P Global Commodity Insights, said in a note.
“This could also boost freight rates and tanker insurance premiums, narrow the Brent-Dubai spread, and hurt refinery margins, particularly in Asia,” Joswick added.
China’s crude oil throughput declined by 1.8% in May from a year earlier to the lowest level since August, official data showed on Monday, as maintenance at both state-owned and independent refineries curbed operations.
U.S. President Donald Trump said on Sunday he hoped Israel and Iran could broker a ceasefire, but added that sometimes countries had to fight it out first. Trump said the U.S. would continue to support Israel but declined to say if he had asked the U.S. ally to pause its strikes on Iran.
German Chancellor Friedrich Merz said he hoped a meeting of the Group of Seven leaders convening in Canada would reach an agreement to help resolve the conflict and keep it from escalating.
Meanwhile, Iran has told mediators Qatar and Oman that it is not open to negotiating a ceasefire while under Israeli attack, an official briefed on the communications told Reuters on Sunday.
Reporting by Anna Hirtenstein in London. Additional reporting by Mohi Narayan in New Delhi and Yuka Obayashi in Tokyo; editing by Kate Mayberry, Jason Neely and Aidan Lewis
This article was first reported by Reuters
