Oil prices (BZ=F, CL=F) are trading lower on Monday following Iran's weekend air attack on Israel. Iran's drones and missiles were ultimately shot down, but markets are now closely watching to see if Israel will retaliate.

Yahoo Finance's Rick Newman breaks down the details, providing insight into how an Israeli retaliation could affect markets. Newman also explores how a potential Israeli attack could influence the upcoming US presidential election.

For more expert insight and the latest market action, click here to watch this full episode of Morning Brief.

This post was written by Angel Smith

Video Transcript

BRAD SMITH: As we're tracking futures pointing to gains, despite those tensions that you mentioned in the Middle East reaching a tipping point over the weekend here, there's much more to consider as Iran perpetrating what the White House is calling an unprecedented air attack on Israel over the weekend, launching more than 300 drones and missiles. President Biden urging caution as Israel weighs its response to the attack. To break down what's next for the conflict, Yahoo Finance's very own Rick Newman joins us here at the desk. Rick, what do we know so far? And what's the White House response been?

RICK NEWMAN: Well, first of all, astonishing development that Iran fired something like 300 drones missiles, including ballistic missiles, the ones that go up into space and are hard-- you know, harder to hit down. And not a single one of them apparently hit its target. Israel, along with the United States and other allies, apparently shot all of them down. So number one, that is remarkable.

Number two, look what's happening with oil prices today, actually ticking down a little bit. So the markets are relieved. And I think what markets now want to see is, could we just say, this is it. No more overt shooting at each other. So Israel has a choice to make. Is Israel going to retaliate back against Iran? And then if they do, is it going to be a country-on-country strike that the whole world sees, or is it going to be something covert?

I think markets are saying, hey, Israel, whatever you do, make it covert. Please don't rattle markets any more than they are right now.

SEANA SMITH: And, Rick, where does that leave the US? Because there's also talk maybe about increased sanctions on Iran, what exactly that could then-- just in terms of the implications for the energy markets specifically, also the broader market, so what could that potentially look like?

RICK NEWMAN: So one other minor, little complication here, President Biden running for re-election. And guess what President Biden needs? He needs gasoline prices to not go any higher. And certainly, he doesn't want them cresting, you know, that $4 mark, which is where people freak out. So Biden has been doing everything he can to keep oil and gasoline prices down. So I don't think you're going to see anything US led that is going to affect global oil supplies.

Could there be other sanctions on Iran? I guess. There have been sanctions on Iran. They haven't been real effective. So, you know, I think-- by the way, for what it's worth, this is embarrassing for Iran. I mean, they tried-- this the first time they've ever attacked Israel from their own turf in such an overt way that the whole world is watching. And the United States telegraphed it. Everybody knew it was coming. US intelligence, very good. The world was prepared.

In fact, I mean, I think you could say that the US warning that this was coming late last week actually conditioned markets a little bit. So that might have been why we saw the sell-off on Friday. And markets priced this in amazingly. So markets priced this in, at least in terms of oil. So I think what we're going to see from the US and any kind of sanctions now is, could we please just stabilize the situation?

It's a possible opening for Israel. It's got world opinion back on its side. Can Israel and its leader, Benjamin Netanyahu-- can they use that to their advantage? And, you know, the possible best-case outcome here is Israel says, we've got an opportunity here. Maybe it's time to start winding down the operations in Gaza and try to retain a little bit of this global goodwill that we have.