Oil prices plunge most in 2 years after Israel’s strike on Iran spares production facilities

Oil prices plunged on Monday, dropping more than 6% in the steepest intra-day decline since September 2022.

Brent crude, the international oil benchmark, pared some of its steepest losses by mid-morning and was down by about 5% to $72.13 a barrel. US oil prices fell over 5% to $67.90 a barrel.

The sharp drop came after Israel retaliated against Iran over the weekend. The strikes were a response to an attack by Iran on October 1 that saw about 200 ballistic missiles launched at Israel.

Iran produced an average of about 4 million barrels of oil per day in 2023. Prior to the retaliation by Israel, energy markets were bracing for a targeted strike against Iran’s oil production sites to disrupt global energy markets and push crude prices higher.

But Israel’s attack over the weekend avoided Iran’s oil facilities, which had previously been considered as a target, and instead targeted military sites throughout the country, hitting missile-production facilities and air-defense sites.

“The market was concerned that the oil and nuclear facilities could have been hit. That didn’t happen, so the market is pricing out that risk for now,” UBS analyst Giovanni Staunovo said.

Additionally, a report from Axios said that Israel notified Iran of the imminent strike and warned the country against retaliating. Since the strike, Iran has played down Israel’s retaliation and said they caused “limited damage.”

The reported warning from Israel and downplaying of the attack by officials in Iran suggests both countries could be trying to avoid further escalation in their conflict, potentially easing tensions that have kept oil prices elevated in recent months.