Oil Shock Fear Drives Oil Prices Up 5.5%... Biden Says Israel Considering Attack on Iranian Oil Facilities

Biden "Discussing Attacks on Israeli and Iranian Oil Facilities"
WTI and Brent Oil Prices Surge Around 4%
US Ahead of Election Likely to Focus on Preventing Oil Shock

As concerns over a full-scale war between Israel and Iran shake the Middle East, international oil prices have surged by about 4%. U.S. President Joe Biden revealed that Israel is considering retaliatory measures, including attacks on Iranian oil facilities, in response to Iran's large-scale missile strikes against Israel, fueling fears of an 'oil shock' and driving oil prices higher.

On the 3rd (local time) at the New York Mercantile Exchange, as of 11:43 a.m., November delivery West Texas Intermediate (WTI) crude oil was trading at $73.03 per barrel, up $2.93 (4.18%) from the previous trading day. The global oil price benchmark Brent crude for December delivery was trading at $76.69 per barrel, up $2.89 (3.91%) from the previous day. At one point during the session, WTI surged nearly 5.5% to approach $74 per barrel, while Brent crude also rose close to $77 per barrel.

Oil prices surged after President Biden mentioned the possibility of Israeli retaliatory strikes. When asked by reporters whether the U.S. would allow Israel to attack Iranian oil facilities, he said, "We are discussing it," adding, "We are advising Israel, not granting permission."

Earlier, on the 1st, Iran launched about 200 ballistic missiles toward Israel in retaliation for the assassination of leaders of the Lebanese militant group Hezbollah and the Palestinian militant group Hamas. In response, Israel immediately declared a counter-retaliation against Iran, escalating tensions in the Middle East to a peak. As Israel and Iran, which have so far refrained from direct conflict in the Middle East?home to one-third of the world's oil supply?face growing fears of a full-scale war, international oil prices are soaring.

According to Citigroup, if Israel launches a large-scale attack on Iranian oil facilities, global oil supply could decrease by 1.5 million barrels per day. If Israel's attack remains limited, the supply reduction is estimated to be between 300,000 and 450,000 barrels per day.

However, with the November presidential election approaching, the Biden administration is focusing on stabilizing oil prices, leading to opinions that it is uncertain whether Israel will target oil facilities that would burden the U.S. government directly. To prevent inflation from rising due to soaring oil prices, the U.S. and major oil-producing countries are concentrating on blocking the possibility of an oil shock, and Israel is also likely to consider this in its response.

Rebecca Babin, senior energy trader at CIBC Private Wealth, said, "It is not surprising to the market that energy infrastructure is considered a potential target, but President Biden's remarks bring this closer to reality. However, with the election approaching, there are also skeptical views on whether Israel will actually attack Iran's oil facilities."