Oil Rallies on Report Iran Plans to Attack Israel Via Proxies

Alex Longley, Mia Gindis and Maggie Eastland
2 min read

(Bloomberg) -- Oil jumped on a report that Iran may be preparing to attack Israel from Iraqi territory in the coming days, jolting the market’s attention back to a potential flare-up of Middle East hostilities.

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West Texas Intermediate surged as much as 3.2% to trade near $71 a barrel, while Brent rallied above $74. Iran is planning a strike through militias that it backs in Iraq, with the assault expected to be carried out using drones and ballistic missiles, Axios reported, citing two Israeli sources it didn’t identify.

“Volatility should remain in the days to come,” said Tariq Zahir, managing member of the global macro program at Tyche Capital Advisors LLC. Trading is sure to be jumpy ahead of the US election next week, he said.

Prices held onto gains after US economic data showed the nation added fewer jobs than expected last month, though the figures were distorted by storms and labor disputes.

Crude has regained most of the ground it lost at the start of the week, which followed Israel’s limited attack on Iran in response to an Oct. 1 missile barrage. Some analysts warned that the market had “relaxed too quickly,” and there were signs on Friday that oil options markets are once again pricing in large premiums for bullish call contracts.

Developments in the Middle East this week had been pointing to a potential easing of hostilities, with Israel also considering a US-led proposal to end the conflict in Lebanon. Still, the Israeli military said the nation would hit back “very hard” should Iran attack again.

The oil market has a number of key events on the horizon that could move prices, from the US election and a meeting of China’s top legislative body next week, to a looming decision from OPEC+ to start gradually reviving production starting in December.

China’s manufacturing activity, meanwhile, unexpectedly picked up in October despite a weeklong holiday. The readings offer a sign of stabilization after Beijing unleashed stimulus to shore up the economy. In another sign of improved confidence, residential property sales in the nation rose last month, the first year-on-year increase of 2024.

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