Oil swings near $90 with risk of Iran strike on Israel in focus

Oil cooled some of the previous day’s gains amid a choppy few days of activity as traders continue to watch for a potential attack on Israel by Iran or its proxies.

Brent futures erased an earlier gain to trade down 0.5 percent near $90. The dollar was firmer, making commodities priced in the currency less appealing.

The US and its allies believe a strike is imminent, according to people familiar with the matter, following a threat by Iran to hit Israel in retaliation for an attack on a diplomatic compound in Syria last week.

Oil is up about 18 percent this year as geopolitical tensions combine with OPEC+ supply cuts to drive prices higher. Still, there are headwinds in the form of swelling US crude stockpiles now at the highest since July and a hot US inflation print, which may delay rate cuts from the Federal Reserve.

Many of the world’s top traders and Wall Street banks are shifting toward a bullish tone on prices, with some seeing a possible return to $100 for the global benchmark. However, Macquarie Group said Brent will enter a bear market in the second half, with recent gains unlikely to hold if geopolitical events don’t lead to actual supply disruptions.

“Geopolitical risks continue to linger as the US warned Israel about an imminent Iran attack,” said Keshav Lohiya, founder of consultant Oilytics. “The question remains if the market loses patience with it in days if nothing materializes.”

On Wednesday, Iran’s Supreme Leader Ali Khamenei repeated a vow to retaliate against Israel for the Damascus strike. Even so, the head of the naval forces said recently that the country has chosen not to disrupt the Strait of Hormuz, a major trade route for Middle Eastern oil.

Threats by Yemen’s Houthis against merchant vessels in the Red Sea and the Gulf of Aden remain persistent, the commander overseeing EU’s Operation Aspides told Al Arabiya English, stressing that the mission continues to be defensive in nature to protect the vital shipping routes.

“The area has seen multiple attacks in the past months, from oneway drones, saturation attempts, complex attacks including shore-, air- and sea-based assets, drones, and ballistic missiles,” Rear Admiral Vasileios Gryparis said in an exclusive interview.

Aspides has engaged and deterred several Houthi attacks since its deployment to the volatile area, Gryparis said. (Supplied)

Aspides has engaged and deterred several Houthi attacks since its deployment to the volatile area, Gryparis said. (Supplied)

“From the launch of the Operation Aspides on February 19, 2024 until now, the threat level remains the same,” he said.

The EU’s Naval Force (EUNAVFOR) Operation Aspides is a defensive maritime security mission that was launched earlier this year in response to drone and missile attacks by the Iran-backed Houthis on commercial, merchant and military ships in the Red Sea since last November.

The Houthis have said that their campaign was in solidarity with Palestinians following the Israeli bombardment of Gaza in retaliation for the Oct. 7 Hamas attack.

Aspides has engaged and deterred several Houthi attacks since its deployment to the volatile area, Gryparis said.

With a one-year mandate, the mission’s headquarters is based in Greece and has 19 EU nations contributing to it with four naval frigates deployed and over 800 personnel at sea.

“During the almost eight weeks of the operation, Aspides has achieved the close protection of 79 merchant vessels contributing to the restoration of the confidence of the shipping industry to return to the Red Sea and the Suez Canal trading routes,” Gryparis said.

The operation commander also revealed that the task force has shot