(Bloomberg) — Oil held a modest decline as the risk of a significant escalation of hostilities between Israel and Iran eased following a tit-for-tat exchange of attacks last week.
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Brent traded near $87 a barrel after losing 0.3% on Monday, and West Texas Intermediate was above $82. Israel is returning to its goals of eliminating what it says is the last remaining stronghold of Hamas in Gaza and of freeing the remaining hostages, which will keep tensions elevated in the region.
“Crude has unwound the Israel-Iran risk premium but could slip into a holding pattern,” said Vandana Hari, founder of Vanda Insights in Singapore. “It’s hard to see a correction from current levels unless there’s a breakthrough on the Gaza front.”
Futures are coming off a back-to-back weekly loss, but remain higher this year due to geopolitical risks and OPEC+ supply cuts that have tightened the market. The US Congress has moved to further curb Iran’s oil sector, although analysts see a muted impact on exports.
Easing tensions are being reflected in the options market, with bullish Brent calls losing its premium to the opposite puts as of Monday’s close. However, timespreads are still signaling strength, with the gap between the two nearest contracts for the global benchmark at 94 cents a barrel in backwardation, compared with 79 cents a week ago.
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