Israel emerged largely unscathed from Iran’s vengeance on Saturday, but the same may not be true for American motorists.
Although Israel sustained slight damage from the roughly 300 drones and missiles Iran launched at it, Iran’s activities are likely to add to oil market jitters that would become even worse if Israel responds and counter-attacks Iran.
Hours before the attack on Israel, Iran seized a cargo ship in the Strait of Hormuz, through which many oil tankers pass, days after suggesting that it could block all traffic through the waterway if it wishes to do so.
With that as the wild weekend, Monday is expected to feature an increase in oil prices, according to the New York Post. Prices already rose on Friday.
“It is only reasonable to expect stronger prices when trading resumes,” Tamas Varga of oil broker PVM said. “Having said that, there has been no impact on production so far and Iran has said that ‘the matter can be deemed concluded.’”
“However fierce and painful the initial market reaction will be, the rally could prove to be short-lived unless supply from the region is materially disrupted,” Varga said.
One expert said prices will rise, but the real question is how long that increase will last.
“Oil prices might spike at the opening as this is the first time Iran has struck Israel from its territory,” UBS analyst Giovanni Staunovo said.
“How long any bounce will last will … depend on the Israeli response,” Staunovo said, noting that the G7 meeting President Joe Biden said he would call could matter “if they target or not Iranian crude exports.”
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All this assumes Iran will not blockade the strait where it seized a ship Saturday.
“Crude prices already included a risk premium, and the extent to which it will widen further almost exclusively depends on developments near Iran around the Strait of Hormuz,” Ole Hansen at Saxo Bank said.
On Sunday, AAA estimated the average price for a gallon of unleaded regular gasoline is $3.632 per gallon, up from $3.412 a month ago. California has the highest average price at $5.453 per gallon.
Fox Business noted that as of Wednesday, gas prices were more than 50 percent higher than when Biden was inaugurated, according to AAA.
Andrew Gross of AAA called the current oil price environment “a weird time because we have two wars going on, and the oil market is very wary of that,” according to CBS.
“The oil market is very volatile and doesn’t like the potential for bad news, or any worries that the war could widen to include oil-producing countries,” he said.
The potential for bad news remains high after Sunday’s meeting of Israel’s War Cabinet, according to the Telegraph.
The report said that Cabinet members are united in the desire to respond, but disagree over the extent of any military action as well as the timing.
An Israeli representative said that “offensive and defensive” operations were agreed upon, but did not say what they were or when they might take place.
