Jack Farchy, Archie Hunter and Jack Wittels
5 min read
In This Article:
(Bloomberg) -- The past two years of escalating tensions in the Middle East have taught oil traders to be sanguine about the risk of disruption to oil supplies.
Most Read from Bloomberg
-
Trump’s Military Parade Has Washington Bracing for Tanks and Weaponry
-
As Part of a $45 Billion Push, ICE Prepares for a Vast Expansion of Detention Space
The barrage of headlines has revived memories of the political upheavals and prices spikes of the 1970s — and yet even when oil prices have jumped, it inevitably proved short-lived. As Iran and Israel traded volleys of missiles in April last year and again in October, Middle Eastern oil continued to flow to the global market unaffected.
Now, the latest assault by Israel is putting oil traders’ nonchalance to the test. There’s been no impact on supplies so far, but the strikes have shaken a market that for most of this year has been overshadowed by worries about a looming surplus driving down prices, with OPEC+ quickly unwinding production cuts and output rising elsewhere from Brazil to Guyana, while President Donald Trump’s trade war threatens demand.
Even if many believe that the oil market may ultimately escape unscathed, the widespread uncertainty over how strongly Iran will respond, whether Israel will launch further attacks, and how the US will react is forcing traders to price in a huge range of possible outcomes.
With hours left until the end of the trading week, few were brave enough to risk going into the weekend short. Brent futures spiked as much as 13% early on Friday and settled 7% higher at about $74 a barrel.
“When there’s a war on you’re not going to be short anything over the weekend,” said Andreas Laskaratos, chief executive officer of energy trading house AB Commodities. “Although the fundamentals haven’t changed you can’t trade against the headlines over the weekend.”
Traders and analysts began to game out scenarios for possible escalation or de-escalation almost as soon as the first Israeli missiles hit Iran in the early hours of Friday morning. Laskaratos says his Europe-based traders were at their desks by about 4:30 or 5:00 a.m.
Read Bloomberg’s live blog on the latest from the Middle East
Analysts at Goldman Sachs Group Inc. raised their oil price forecasts for the coming months $2-$3 a barrel, but laid out possible scenarios ranging from a surge in prices above $100 a barrel in the worst-case scenario, to a drop below $50 next year in their most bearish scenario.
