Oil wiped out an earlier sharp jump as Iranian media appeared to downplay the impact of Israeli strikes that followed last weekend’s unprecedented bombardment by Tehran.

Brent crude traded little changed near US$87 a barrel after soaring more than four per cent above $90 on renewed concerns over the potential for a wider conflict that could endanger oil supplies. Israel launched a strike on Iran, according to two U.S. officials, but the Islamic Republic’s semi-official Tasnim news agency denied the reports, and said the Isfahan nuclear facility was safe.

An Iranian military official was quoted by the semi-official Mehr news agency as saying Tehran doesn’t feel compelled to react to the blasts.

Traders had been girding for an Israeli response to last weekend’s missile and drone attack, with the rhetoric escalating as Tehran warned against striking its nuclear facilities. The Middle East accounts for about a third of crude supply. 

“The markets are in for a morning of reactionary headline watching,” said John Evans, an analyst at brokerage PVM.

Crude has rallied this year, with gains driven by the worsening hostilities in the Middle East, as well as OPEC+ supply cuts that have tightened the market. Higher energy prices, if sustained, would boosts risks for the global economy and pose a challenge for central bankers as they seek to tame inflation.

The supply curbs orchestrated by OPEC+, which include cutbacks in Saudi Arabia as well as Russia, mean that the producer group has a buffer of unused capacity of several million barrels a day. At present, the output restrictions are set to last through the first half of this year.

“We continue to highlight the heightened risk that this war will move up the escalation ladder,” RBC Capital Markets LLC analysts including Helima Croft said in a note before crude’s spike. “Oil supplies could be caught in the cross-hairs of this metastasizing conflict.”


  • Brent for June settlement rose 0.1 per cent to $87.22 a barrel at 9:37 a.m. in London. Earlier, Brent gained as much as 4.2 per cent to $90.75 a barrel.
  • WTI for May delivery advanced 0.3 per cent to $82.95 a barrel.