Oil jumped to its highest price since October as Israel braced for a possible attack from Iran that could threaten major upheaval in a region that accounts for a third of global crude oil production.
Attack expected as soon as within the next 48 hourswhich would mark a significant expansion of the conflict that began when Hamas attacked Israel in October. Global benchmark Brent rose as much as 2.7% to $92 a barrel, a level last reached in the early days of the war. The US benchmark West Texas Intermediate rose as much as 3.1% to above $87.
Israel expects drone or missile strikes against government targets within days, either directly or through Iranian proxies, people familiar with Western intelligence assessments said. The move has still not been approved by Tehran’s top officials, the people said, while the US has moved more military assets to the region.
“Iran’s direct involvement raises the possibility of potential supply disruptions in the region, resulting in many traders continuing to seek exposure to crude oil and crude oil call options,” said Rebecca Babin, senior energy trader at CIBC Private Wealth. “Ahead of a weekend with significant news risk, there are few sellers willing to step in and sell on the upswing.”
Oil is up about 19% this year as conflict in the Middle East strengthens a market shaped by supply constraints and stronger than expected demand.
Escalating geopolitical tensions, including Ukrainian attacks on Russian energy infrastructure, have fueled bullish activity in the oil options market. Buying of call options, which pay when prices rise, has increased in recent days, with implied volatility jumping to a two-month high. Brent options continue to trade at a premium to bearish puts.