Oil prices fell on Friday following earlier reports of an Israeli attack on Iran, which initially spiked market concerns about escalated tensions in the Middle East.
Brent futures dropped by 0.5% to $86.65 a barrel, while the U.S. West Texas Intermediate contract decreased by 0.4% to $82.39, after both surged by more than $3 earlier in the session.
Reports indicated that Israel had launched an attack on Iranian soil, causing explosions as per Iranian media, though Iran downplayed the incident, suggesting no plans for retaliation to avoid wider conflict.
Market analyst Joshua Mahony noted that while the initial spike in oil prices reflected fears of escalation, subsequent reversals in both equities and crude suggest a more restrained response aimed at demonstrating willingness to act rather than seeking war.
Iran retaliated last weekend with hundreds of drones and missiles following a suspected Israeli attack on its embassy compound in Syria, but most were intercepted before causing significant damage.
Investors had been monitoring Israel’s reaction to Iran’s drone attacks closely, with oil prices reflecting a decrease in geopolitical risk premium amid expectations of moderated retaliation.
Additionally, the U.S. imposed sanctions on Iran, targeting its unmanned aerial vehicle production, but excluding its oil industry.
