Oil Prices Soar Amid Mutual Attacks Between Iran and Israel Threatening Ceasefire

SadaNews - Oil prices surged after Iran and Israel exchanged attacks, jeopardizing the fragile ceasefire in the Middle East as talks aimed at ending the war falter.

Brent crude prices increased by up to 5%, reaching $97.75 per barrel, while West Texas Intermediate crude jumped close to $95 per barrel.

Israel stated it targeted military sites within Iran, in response to previous missile attacks launched by Tehran, despite U.S. President Donald Trump's urging to Israeli Prime Minister Benjamin Netanyahu to refrain from retaliating.

In contrast, the semi-official news agency "Fars" reported, citing a statement from the Iranian Revolutionary Guard, that Tehran launched new attacks targeting key facilities at the "Negev" and "Tel Nof" air bases in Israel, in response to strikes that targeted several cities within Iran earlier on Monday.

Trump Calls for Resuming Negotiations

U.S. President Donald Trump urged Iran to return to the negotiating table following the Iranian attack, and criticized the Israeli strikes on Beirut on Sunday, according to "Fox News."

He also told "Axios" earlier that he would pressure Israeli Prime Minister Benjamin Netanyahu not to respond to Tehran.

New Escalation

The Middle East saw a new escalation in hostilities last week, threatening to disrupt the fragile ceasefire and complicating negotiations aimed at ending the war. The conflict has led to a near closure of the vital Strait of Hormuz, restricting crude oil, fuel, and natural gas flows to global markets.

Andy Lipow, president of Lipow Oil Associates, stated: "The escalation between Israel and Iran over the weekend shows again just how fragile the ceasefire is."

He added: "Increased hostilities raise the geopolitical risks of the strait being closed longer than expected, and increase the chances of Iran taking further steps to restrict shipping in the Red Sea."

U.S. Central Command (CENTCOM) reported on Sunday that it shot down two Iranian drones that were threatening international navigation in the strait.

This came after six ballistic missiles were fired towards Bahrain and Kuwait on Friday, which were intercepted, while the United States carried out strikes targeting Iranian coastal radar sites.

Obstacles to a War Termination Agreement

There are still major points of contention hindering progress towards a peace agreement, including a parallel ceasefire between Israel and Lebanon. Iran has demanded a ceasefire in Lebanon before reaching an agreement with the United States, while an advisor to Iranian Supreme Leader Ali Khamenei told "CNN", "the ball is in Trump's court."

The U.S. president told the "Financial Times" that his Israeli counterpart will have to accept any agreement the U.S. makes with Iran. He added: "I make the decisions. I make all the decisions", indicating that Netanyahu "does not make the decisions."

Israel and Lebanon had reached a conditional ceasefire last week, contingent on "Hezbollah" stopping hostilities, but the Iran-backed group rejected the ceasefire agreement. Clashes between Israeli forces and "Hezbollah" continued over the weekend.

Harris Khurshid, chief investment officer at "Karobar Capital", said: "The market has been underestimating the real divergence between the parties involved."

He added: "The market continues to swing between pricing the possibility of an agreement and pricing the reality that neither side has changed its fundamental position. And each time optimism outpaces reality a little, oil prices bounce back up."

Challenges to Resuming Oil Flows

Even if a peace agreement is reached between the U.S. and Iran, the return of oil flows to normal will face multiple obstacles.

Among these obstacles are clearing mines from the Strait of Hormuz, restarting stopped fields that may take months to come back online, in addition to repairing damage to energy infrastructure caused by missile and drone attacks.

Separately, the "OPEC+" alliance agreed to a new increase in oil production quotas for July by 188,000 barrels per day, even though disruptions to exports from the Arabian Gulf prevent most members from implementing this increase.

In the latest trades, Brent crude contracts for August delivery rose 4.8% to $97.52 per barrel as of 1:39 PM Singapore time, while West Texas Intermediate futures for July delivery jumped 4.5% to $94.58 per barrel.