Crude Oil Prices Surge on Geopolitical Risks
Crude oil futures (/CLK4) reversed early losses and turned positive Thursday afternoon as geopolitical tensions ramped up amid reports that Iran would soon respond to this week’s strike by Israel that killed several commanders of the Islamic Revolutionary Guard Corps (IRGC).
On Monday, Israel conducted an airstrike on a diplomatic compound next to the Iranian embassy in Damascus, the capital of Syria. The attack killed several senior IRGC members, including Gen. Mohammad Reza Zahedi, a top IRGC commander in Syria, along with Gen. Mohammad Hadi Hajriahimi, his deputy commander. The IRGC is a U.S.-listed terror group, and Sweden’s Parliament voted to designate the IRGC as a terror organization last year.
Israel began preparing for a retaliatory response almost immediately. By Thursday, an attack seemed imminent, with the Israeli military scrambling GPS and cellphone signals across parts of the country. That is a sign that countermeasures against drones and other GPS-guided attack platforms were being activated.
According to the Wall Street Journal, the military also suspended leave for combat units and activated reserve units to help bolster air defenses. Outside of the country, Israel has heightened its security posture at its embassies, which many analysts consider more likely targets for Iran, given its limited ability to penetrate Israel’s robust defenses.
Other analysts believe that Iran will avoid escalation altogether and fabricate claims that it retaliated to assuage domestic hardliners.
In any case, oil markets are on edge as the response, whatever it may be, is expected as soon as tonight. The acute rise in oil prices also comes ahead of tomorrow morning’s non-farm payrolls report. Should these risk events pass without tangible effects on the global energy market, oil prices might return to the levels seen earlier Thursday, around $85 per barrel.
Thomas Westwater, a tastylive financial writer and analyst, has eight years of markets and trading experience. @fxwestwater
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