Crude Oil Drops 6% as Risk of War Escalation in the Middle East Eases
Both Brent and West Texas Intermediate (WTI) crude hit their lowest levels since October 1 during Monday’s session, with prices dropping more than $4 per barrel amid easing fears of supply disruptions from the Middle East conflict.
The sell-off followed an Israeli retaliatory strike over the weekend targeting missile factories and military sites near Tehran and western Iran. Crucially, the attacks did not impact oil or nuclear facilities, alleviating concerns about energy supply disruptions.
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Brent futures dropped 6.09%, or $4.63, to $71.42 per barrel, while WTI fell 6.13%, or $4.40, to $67.38 per barrel. These declines highlight how heavily markets are driven by geopolitical developments.
Last week, oil prices rose by 4% as investors reacted to heightened uncertainty surrounding both the U.S. elections and Israel’s potential response to Iran’s missile attack on October 1.
The Israeli airstrikes involved three waves of attacks, conducted before dawn on Saturday. While U.S. officials initially feared that Israel might target Iran’s nuclear or oil infrastructure, the strikes focused on military targets, calming market concerns.
In response to the developments, Citi lowered its three-month price target for Brent from $74 to $70 per barrel, citing reduced short-term geopolitical risk.
Meanwhile, OPEC+ maintained its production policy unchanged last month, including plans to increase output starting in December. Analysts warn that if tensions in the Middle East remain under control, WTI could trend toward $65 per barrel by 2025, with downside risks if OPEC+ fails to manage supply effectively.
However, tensions remain elevated. On Monday, Iranian Foreign Ministry spokesman Esmaeil Baghaei vowed that Iran would “use all available tools” to respond to the Israeli attacks.
Last week’s 4% average increase in oil prices reflected market volatility driven by a mix of geopolitical uncertainty and anticipation ahead of the U.S. presidential election on November 5.
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