Oil prices sink after Iranian strike on US airbase reduces fears of disruption

Oil prices dropped sharply after Iran’s retaliatory missile strike on a US airbase reduced concern that the country was poised to strain energy markets by closing off a vital trade route.

Crude oil prices sank by 7% on Monday, with West Texas Intermediate (WTI) futures dropping to $68.51, as the Iranian action on the Al Udeid base in Qatar raised hopes that the conflict would not immediately disrupt oil supplies from the region.

No casualties were reported after the strike, which the US defense department described as “largely symbolic” after the US bombed three nuclear sites in Iran on Saturday.

While the Iranian parliament voted to close the strait of Hormuz – through which more than a fifth of the world’s oil supply, 20m barrels, and much of its liquefied gas passes each day – it has so far remained open.

“It is somewhat the lesser of the two evils,” said Kpler analyst Matt Smith. “It seems unlikely that they’re going to try and close the strait of Hormuz.”

John Kilduff, a partner at Again Capital, said: “Oil flows, for now, aren’t the primary target, and are likely not to be impacted. I think it’s going to be military retaliation on US, bases and/or trying to hit more of the Israeli civilian targets.”

US stocks also rose slightly, with the benchmark S&P 500 up 0.6% and the Dow Jones industrial average up 0.5% in New York, on a broadly muted day of trading in the global equity markets.

Other leading indices struggled for direction. The FTSE 100 closed down 0.2% in London. The Nikkei 225 finished down just 0.1% in Tokyo.

Investors have become “jaded to geopolitical risks and greater uncertainty after the events throughout this year so far”, John Canavan, lead analyst at Oxford Economics, observed earlier on Monday.

Reuters contributed reporting.