Traders evaluate the repercussions of the Iranian strike on Israel

Oil traders are reevaluating the geopolitical risk premium they need to apply to a market where tight supply and demand fundamentals have pushed prices above $90 a barrel.

Iran’s attack on Israel represents a clear escalation in hostilities by bringing the two countries into direct conflict, rather than fighting through proxies. Iran says that its attack, which came in response to the bombing of its embassy in Syria, “concluded” the phase of mutual aggression, but Israel reserved the right to respond.

Giovanni Stanovo, an analyst at the UBS Group, said that oil prices “may rise at the opening, as this is the first time that Iran has struck Israel from its territory,” adding: “How long any rebound will last also depends on the Israeli response.”

The risk of a direct Iranian attack on Israel has already been at least partially taken into account, as the price of benchmark Brent crude, which has risen 17% so far this year, exceeded $90 a barrel after the attack on the Iranian embassy in Syria. (Bloomberg)