Oil prices were volatile on Monday after a sharp 7% jump on Friday triggered by renewed military strikes between Israel and Iran. Over the weekend, concerns about an escalation of the conflict and possible disruptions to oil flows from the Middle East weighed on markets, "Reuters" reports.
Brent crude futures fell 30 cents, or 0.4%, to $73.93 a barrel, while U.S. West Texas Intermediate (WTI) futures fell 18 cents, or 0.3%, to $72.80. However, both benchmarks were up 7% at the close on Friday after jumping more than 13% during the session to their highest levels since January.
The main question for markets remains how the conflict will unfold and how it will affect energy flows. According to Harry Chilinguirian, head of research at Onyx Capital Group, while there have been no serious attempts by Iran to disrupt oil exports through the Strait of Hormuz, the situation remains unpredictable.
On Monday, Iranian missiles hit the Israeli cities of Tel Aviv and Haifa, destroying buildings and raising fears of a wider conflict. On Sunday, the two adversaries exchanged blows, causing civilian casualties and calls for precautions.
The Strait of Hormuz, through which about 20% of the world’s oil passes, is a major focus. Potential disruptions in the region could seriously push up oil prices, analysts have warned. Iran, which currently produces about 3.3 million barrels per day, has a key role to play, as the country exports more than 2 million barrels per day.
If Iranian oil exports are disrupted, Chinese refiners will have to look for alternatives, such as Russian and other Middle Eastern raw materials. That would lead to higher transportation costs and insurance premiums for tankers.
US President Donald Trump expressed hope for a ceasefire, but added that sometimes countries have to go through the conflict to achieve peace. Germany also expressed hope that G7 leaders would reach a de-escalation agreement. However, Iran has said it is not ready for talks while Israel continues its attacks.