SEATTLE (Oil Monster): Iran retaliated after Israel launched a massive military assault on the country, focusing on its nuclear program and military commanders. After it was confirmed that no energy infrastructure had been damaged, oil prices, which had risen by almost 10% in the immediate aftermath of the Israeli attack, eventually leveled off at about $74 per barrel.
Iran has responded by attacking Israel with more than 500 drones. Given that Israeli attacks have weakened Iran's military capabilities over the past year, it might be challenging to maintain reacting with the same vigor. Whether Iran will accept the US offer to prevent more harm is still up in the air.
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According to Wood Mackenzie, a large-scale Iranian reaction is improbable given the scope of the Israeli attacks and Israeli air superiority. Over the summer, it's expected that the oil prices will lose part of the current risk premium. As OPEC+ supply returns to the market, some of the risk premiums should decrease over the next weeks. In Q4 of this year, it anticipates an oversupplied oil market.
Mackenzie predicts that the price of Brent will decline from its current levels, assuming that the Iranian retribution is symbolic. It stated that Brent is unlikely to return to the current lows of $60 to $65/bbl given the uncertainty.
Wood Mackenzie pointed out that exports from the area might be hampered by an attack on shipping in the Gulf or Strait of Hormuz.