By Adedapo Adesanya
Oil prices climbed about 3 per cent on Tuesday after Iran fired over 100 ballistic missiles at Israel in retaliation for Israel’s campaign against its Hezbollah allies in Lebanon.
The action saw the price of Brent futures going up by $1.86 or 2.6 per cent to $73.56 a barrel and the US West Texas Intermediate (WTI) crude up by $1.66 or 2.4 per cent to $69.83 per barrel.
The ballistic missiles launched travel far more quickly and since multiple missiles were launched at once, it made it difficult for Israel’s defences to intercept with 100 per cent accuracy.
Market analysts warn that an Israeli attack on Iranian oil production or export facilities could cause a material disruption, potentially more than a million barrels per day. Iran’s oil industry accounts for over 50 per cent of its budget.
This could further boost oil prices as supply disruptions trigger shortages.
Before news that Iran was planning a missile attack, the oil market was trading down near a two-week low as the outlook for increased supplies and tepid global demand growth outweighed fears over an escalating Middle East conflict and its impact on crude exports from the region.
Also, another Iran-backed group, the Houthis in Yemen, claimed responsibility for attacking at least one of two vessels damaged off the port of Hodeidah in the Red Sea.
The Houthis have launched attacks on international shipping near Yemen since last November in solidarity with the Palestinians in the war between Israel and Hamas in the Gaza Strip.
Reports say the oil tanker Cordelia Moon, flying a Panama flag, and the Liberia-flagged bulk carrier Minoan Courage came under attack from missiles and a drone boat while transiting the Red Sea near Yemen.
It was the first attack on commercial shipping in the Red Sea in weeks and came hours after Israel carried out air strikes on targets in Yemen this weekend.
Meanwhile, a panel of ministers from the Organisation of the Petroleum Exporting Countries and its allies, OPEC+ will meet on October 2 to review the market, with no policy changes expected.
Starting in December, the OPEC+ group is scheduled to raise output by 180,000 barrels per day each month.
The market will also be watching Libya’s moves to add more supply after its parliament agreed on Monday to approve the nomination of a new central bank governor. This could help end a crisis that has reduced the country’s oil output.