Stock futures dipped and oil prices rose in overnight trading after an Israeli missile struck Iran following Iran’s retaliatory attack on the country last weekend. Investors are closely monitoring the conflicts in the Middle East for any signs that escalating hostilities between Israel and Iran could threaten global oil supplies and drive up energy prices.
Crude prices, which had already reached their highest level in months after Iran’s initial drone and missile attack on Israel on April 13, rose above $90 early Friday before eventually giving up those gains. This shift came amid indications that the Iranian government was downplaying the impact of the Israeli attack.
Jim Burkhard, head of research for oil markets at S&P Global Commodity Insights, noted that the conflict between Iran and Israel has not yet disrupted the flow of oil in the Middle East, leading to relatively muted reactions in oil prices. However, he warned that the direct attacks by both countries represent a dangerous escalation that could potentially impact the oil market in the future.
Despite the concerns over heightened tensions in the region, Wall Street analysts interpreted Israel’s limited strike on Iran and Tehran’s measured response as a positive sign that the governments are working to contain the crisis. Adam Crisafulli of Vital Knowledge expressed optimism that the recent events in Iran could help ease tensions between the two countries, at least temporarily.
In afternoon trading, the S&P 500 was down 0.9%, the Dow was up 0.4%, and the Nasdaq was down 2%. In oil trading, U.S. benchmark crude was trading slightly higher at $82.22 per barrel, while Brent crude, the international standard, gained 7 cents to $87.18 per barrel.
While concerns about Middle East unrest persist, experts believe that some of the risks to oil supply have already been factored into current prices. Neil Shearing, group chief economist at Capital Economics, highlighted the increased risk to physical oil supply but noted that the market response suggests some level of preparedness for such events.
Gasoline prices in the U.S. have been on the rise over the past month, with the national average for a gallon of regular now at $3.67, up 21 cents from a month ago. Despite the ongoing conflicts in the Middle East and Ukraine, AAA does not anticipate a significant spike in domestic gas prices at this time, citing a decrease in fuel demand between spring breaks and the upcoming Memorial Day holiday.
Overall, while the situation in the Middle East remains volatile, the markets are cautiously optimistic about the potential for de-escalation and containment of the crisis between Israel and Iran.
