The price of oil decreases by over 4% following Israel's "limited" attack on Iran, which did not significantly disrupt supplies.

• On Monday, oil prices decreased due to Israel's "limited" missile attacks on Iran over the weekend.
• The price of Brent crude benchmark decreased by 4.34% to $72.75 a barrel, while the price of US West Texas Intermediate crude decreased by 4.54% to $68.52 per barrel.
• On Saturday, Israel responded to Tehran's ballistic missile attack on Israel on Oct. 1 by attacking Iran's military installations in three provinces.

On Monday, oil prices dropped over 4% due to reports that Israel's attacks on Iran over the weekend were limited, according to local media. Citi analysts also predicted that there was a low chance of an escalation that would disrupt oil supplies.

The price of Brent crude benchmark decreased by 4.34% to $72.75 a barrel, while the price of US West Texas Intermediate crude decreased by 4.54% to $68.52 per barrel.

On Saturday, Israel responded to Tehran's ballistic missile attack on Israel on Oct. 1 by attacking Iran's military installations in three provinces.

According to Tasnim, an attack in Iran resulted in the deaths of four soldiers and caused "limited damages." The attack avoided targeting oil, nuclear, and civilian infrastructure. Local petro news reported that Iran's oil industry is operating normally with no disruptions.

Since the attack on Israel by Iran-backed Hamas on Oct. 7 last year, markets have been anticipating an Israeli response for several weeks as tensions in the Middle East have escalated.

The primary concern for oil markets has been the direct interaction between the two parties, with the possibility of an attack on Iranian oil facilities increasing recently. As per the U.S. Energy Information Administration, Iran contributes up to 4% of global oil supplies.

Citi analysts predict that the recent Israel military action will not lead to an escalation that affects oil supply, resulting in a reduction of their Brent oil forecast by $4 to $70 per barrel over the next three months.

The oil market is facing an oversupply issue, as Israel avoids targeting crude oil facilities with the possible support of the United States.

Not only major countries like the U.S., Canada, and Brazil, but also smaller players such as Argentina and Senegal have seen an increase in oil production, it was stated.

According to Lipow, it is unlikely that Brent crude oil prices will reach $80 this year as oil prices will continue to be under pressure.

Saul Kavonic, an energy analyst at MST Marquee, stated that the risk premium has decreased by a few dollars per barrel due to the more limited scope of the strikes, which excluded oil infrastructure, and increased the possibility of a de-escalatory pathway.

Whether Iran responds to the attack in the upcoming weeks will determine if the risk premium increases again, according to Kavonic, who stated that the trend remains one of escalation, with a possibility of another round of attacks.

In a cabinet meeting on Sunday, Iranian President Masoud Pezeshkian highlighted Iran's right to respond to Israel's attack, while stressing that they do not seek war.

He stated that they do not desire war, but they will defend their country and the rights of their people. They will respond proportionately to any aggression.

Vivek Dhar, director of mining and energy commodities research at Commonwealth Bank of Australia, stated that market attention will focus on the Hamas-Israel and Israel-Hezbollah ceasefire talks that resumed over the weekend.

Although Israel opted for a low-aggression approach towards Iran, we are uncertain if Israel and Iran's proxies (Hamas and Hezbollah) will achieve a lasting ceasefire.