Oil drops 2%, reversing overnight spike, as Iran does not target energy supply in attacks

Oil prices fell yesterday morning, reversing an earlier spike, after Iran’s rocket attack on American forces in Iraq failed to destroy major energy infrastructure that could have disrupted global crude supply.

Tehran launched more than a dozen ballistic missiles against multiple military bases housing US troops in the early hours of yesterday morning, according to Pentagon officials.

Following an initial spike, oil retreated from highs to turn negative as it became clear no energy infrastructure was targeted. There were no reports of casualties so far either, leading traders to believe maybe there will not be a wider conflict between the US and Iran that could hamper oil flows.

International benchmark Brent crude fell 1.35% to $67.35, a marked reversal after at first climbing more than 4% immediately after news of the attack. The initial spike in response to news of the attack sent Brent up to a high of $71.75 per barrel — its highest since September.

The missile strikes came just hours after the funeral of Iranian Gen. Qasem Soleimani on Tuesday.

The military commander was killed by a US drone at Baghdad International Airport late last week, fuelling already-bitter tensions between Washington and Tehran in the region.

The latest escalation had sparked fears of a widening conflict in the Middle East, with energy market participants increasingly concerned the fallout could soon disrupt regional crude supplies. But tamer comments from both the White House and a member of the Organization of the Petroleum Exporting Countries appeared to convince traders that the worst-case scenario had thus far been avoided.