Doha, Qatar: Oil prices jumped on Friday and settled 7% higher as Israel and Iran traded air strikes, feeding investor worries that the combat could widely disrupt oil exports from the Middle East. Brent crude futures settled at $74.23 a barrel, up $4.87 after earlier soaring over 13% to an intraday high of $78.50. Brent was 12.5% higher than a week ago, noted Al-Attiyah Foundation in its Weekly Energy Market Review.
US West Texas Intermediate crude finished at $72.98 a barrel, up $4.94. During the session, WTI jumped over 13% to $77.62. WTI climbed 13% to its level a week ago. Both benchmarks had their largest intraday moves since 2022 when Russia’s invasion of Ukraine caused a spike in energy prices.
Israel said it had targeted Iran’s nuclear facilities, ballistic missile factories and military commanders on Friday at the start of what it warned would be a prolonged operation to prevent Tehran from building an atomic weapon. Iran has promised a harsh response. Shortly after trading ended on Friday, Iranian missiles hit buildings in Tel Aviv, Israel, according to multiple media reports.
Explosions were also heard in southern Israel. The National Iranian Oil Refining and Distribution Company said oil refining and storage facilities had not been damaged and continued to operate.
The latest developments have also stoked concerns about disruptions to the Strait of Hormuz, a vital shipping passage. About a fifth of the world’s total oil consumption passes through the strait, or some 18 to 19 million bpd of oil, condensate and fuel.
Asian spot liquefied natural gas (LNG) prices saw gains last week as rising temperatures in the northeast part of the region led to some pick-up in demand, and as escalating geopolitical tensions in the Middle East raised concerns about supply disruptions. The average LNG price for July delivery into north-east Asia was at $12.60 per million British thermal units (mmBtu), up from $12.30 per mmBtu last week and its highest levels since early April, industry sources estimated.
Following Israel’s attack on Iranian military and nuclear targets, Iran showed interest in taking revenge to these assaults, expanding the geopolitical premium, analysts said. For gas and LNG, the real risk would be to disrupt LNG exports via the Strait of Hormuz. Given earlier military threats, this still seems far away, at least for now, according to analysts.
Meanwhile, increased South Korean appetite helped to lift prices, as well as incremental demand from Taiwan and China ahead of the cooling demand season.
Many parts of China are experiencing above-seasonal average temperatures, which may increase gas-for-power demand through to end-June, while Japan is expecting a 70% probability for above-average temperatures until the end of the month. In Europe, gas price at the Dutch TTF hub settled at $12.83 per mmBtu, about 6% higher than a week ago. In the US, gas climbed about 3% on Friday on worries the conflict could disrupt Middle Eastern oil and gas supplies.
