- West Texas Intermediate crude for November delivery fell 65 cents, or 0.7%, to $85.32 a barrel on the New York Mercantile Exchange.
- December Brent crude, the global benchmark, was off 51 cents, or 0.6%, at $87.15 a barrel on ICE Futures Europe.
Oil futures experienced a second consecutive day of decline following a more than 4% spike on Monday in reaction to the weekend attack by Hamas, which led to Israel declaring war.
Although Israel is not a significant oil producer, investors are closely monitoring whether the conflict intensifies. Reports have suggested that Iranian military officials assisted in planning and coordinating the Hamas attack. White House national security adviser Jake Sullivan has stated that Iran has been “complicit” in supporting Hamas, but there is no confirmation that Tehran had advance knowledge of the attack.
Following the U.S. withdrawal from the nuclear accord with Iran in 2018 and the subsequent reimposition of sanctions, Iranian oil exports suffered a sharp decline. However, production and exports have partially recovered since then, reaching 3.1 million barrels a day this summer, according to Commerzbank. Estimated exports currently stand at around 2 million barrels a day.
In a note, analysts at ING highlighted the potential risks associated with any escalation of the conflict, particularly if Iran becomes further involved. They also mentioned that stronger enforcement of U.S. sanctions on Iranian oil could tighten the oil market through 2024.
After reaching highs above $90 a barrel in late September due to concerns about a growing supply deficit, both Brent and WTI experienced a significant pullback last week.