Oil prices collapsed by 7% on Monday - after Iran strikes on a US military base in Qatar. Investors now do not believe that the conflict will escalate further and that Iran may go for the most radical measures - cutting off oil exports through the Strait of Hormuz, analysts explained. According to them, a strike on the U.S. presence in the region, and not on important energy facilities or oil tankers, may indicate just the opposite: Iran wants to de-escalate the conflict.

Details

The cost of Brent crude oil contracts on Monday, June 23, fell by more than 7% - to $70.23 per barrel. Commodity prices began to fall sharply after news of an Iranian missile attack on a U.S. military base in Qatar. U.S. West Texas Intermediate (WTI) futures were down nearly 6% to $69.5. For both grades, this was the lowest since mid-June.

Reuters military sources said no one was injured in the attack. Qatari authorities also said there were no casualties. According to Reuters and The New York Times, Tehran warned Qatar and the United States of the planned attack in advance. Qatari authorities say the U.S. military base was evacuated before the strike.

The worst-case scenario for the oil market - Iran blocking oil exports through the Strait of Hormuz, which carries about a fifth of the world's oil - has not yet materialized,  CNBC notes. Traders are breathing a sigh of relief, as Iran's response seems so far focused only on the U.S. military presence in the region, the channel writes. In addition, the retaliatory strike on the US base in Qatar also resulted in no casualties, it emphasizes.

Here's what analysts think about Iran's response

- «Oil started to get cheaper as markets realized: the Iran strikes didn't seem to target energy infrastructure,» notes Rebecca Babin, senior energy trader at CIBC Private Wealth Group. - There indications that the US had advance knowledge of the missile launches. This suggests that the attack was an Iranian attempt to save face rather than a desire to escalate the conflict.»

- «By firing several missiles at the base in Qatar, Iran has signaled that it seeks de-escalation,»  noted Pavel Molchanov, an analyst at Raymond James. - This is very similar to January 2020: then the U.S. killed an Iranian general, and Iran responded with more of a symbolic strike, signaling that it wanted to reduce tensions.»

- «It appears that the market is now assuming a scenario of a gradual easing of the conflict,» Jorge Leon, head of geopolitical analysis at Rystad Energy, told CNBC on Monday. - What's alarming is that the opposite option - an Iranian attempt to close the Strait of Hormuz - is still a real threat. An escalation could happen suddenly and rapidly.»

- «Despite the scary headlines, markets are not seeing a spike in oil prices or signs of heightened geopolitical anxiety - fears of an expanding conflict remain low for now,» noted The Sevens Report analyst Tom Essaye. - Unless investors believe that the conflict will engulf the entire region and severely reduce oil supplies, even rising tensions are unlikely to have a significant negative impact on the market.»

- «First, Iran itself is heavily dependent on this route for exports. Cutting it off is unlikely as it would be a blow to its own economy. Second, the US and its allies maintain a strong naval presence in the region. Blocking the strait could trigger a tough military response against Iran,» analyst Elias Haddad of Brown Brothers Harriman & Co. said in a Bloomberg note.

This article was AI-translated and verified by a human editor

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