- Oil prices surged late Thursday after Israel launched military strikes on Iran, sharply raising the risk of a broader Middle East conflict in a region responsible for roughly one-third of global oil production
- The WTI prompt-month contract rose $5.66 to $73.70/Bbl as of Friday morning (7:32 AM CT)
- The contract had briefly approached $78/Bbl Thursday night following the strike, before pulling back
- The attacks reportedly targeted Iran’s nuclear and military infrastructure, prompting Tehran to vow a “severe response” and amplifying fears of further escalation
- Escalating conflict also heightens the risk of disruptions to oil shipments through the Strait of Hormuz, a critical chokepoint that handles roughly 26% of global oil trade
- Market structure responded swiftly, with the futures curve flipping into backwardation; the spread between the two nearest December Brent contracts widened to $2.30/Bbl, reflecting expectations of near-term supply risk
- Oil options volatility spiked to a three-year high as traders rushed to hedge against further price swings (Bloomberg)
- Second-month Brent implied volatility surged past 50% for the first time since 2022
- Call skew jumped to 19 percentage points, approaching levels last seen during Russia’s invasion of Ukraine
- Iranian officials reported no damage to oil infrastructure, including refineries and storage facilities, with fuel distribution continuing without disruption
- The WTI prompt-month contract rose $5.66 to $73.70/Bbl as of Friday morning (7:32 AM CT)
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