Oil traders braced Sunday for a potential \u201cfear trade\u201d that could push up crude oil prices, at least in the short term, after a surprise attack on Israel by Palestinian militants in Gaza threatened to put added scrutiny on rising Iranian oil exports.<\/p>\n
The conflict may also hold consequences for talks aimed at normalizing relations between Saudi Arabia and Israel.<\/p>\n
\u201cThere is definitely going to be a fear trade put in place. While in the short term there is no impact directly on supply, it\u2019s obvious how things play out over the next 24 to 48 hours could change that,\u201d Phil Flynn, analyst at Price Futures Group in Chicago, told MarketWatch.<\/p>\n
Movements in oil prices, meanwhile, will also serve as a gauge for broader market worries around the conflict, analysts said.<\/p>\n
See: <\/strong>Israeli stocks slump in first day of trade since Gaza attack<\/p>\n Hamas, the Iran-backed,Palestinian militant group that controls the Gaza Strip, staged a sweeping attack on southern Israel early Saturday. More than 600 Israelis were confirmed dead, according to Israeli authorities, with more than 2,400 injured. The Palestinian Health Ministry said at least 2,000 Palestinians were killed and around 2,000 injured in Israeli counterstrikes.<\/p>\n Israeli troops on Sunday were engaged in fierce fighting in an effort to retake territory in southern Israel as Hamas launched further barrages of missiles. Israeli citizens and soldiers were captured and are being held hostage in Gaza, according to the Israeli military.<\/p>\n \u201cIran remains a very big wild card and we will be watching how strongly [Israeli] Prime Minister Netanyahu blames Tehran for facilitating these attacks by providing Hamas with weapons and logistical support,\u201d said Helima Croft, head of global commodity strategy at RBC Capital Markets, in a Sunday morning note.<\/p>\n Read: <\/strong>Biden decries the \u2018unconscionable\u2019 Hamas attack<\/p>\n Iranian crude exports have risen in recent years, indicating the Biden administration has adopted a soft approach to sanctions enforcement, Croft said. Some analysts have put Iranian crude production at more than 3 million barrels a day and exports above 2 million barrels a day \u2014 the highest levels since the Trump administration pulled the U.S. out of the Iranian nuclear accord in 2018, according to The Wall Street Journal. Sales fell to around 400,000 barrels a day in 2020 as the U.S. reimposed sanctions.<\/p>\n <\/p>\n Hedge-fund manager Pierre Andurand, one of the world\u2019s best energy traders, said in a social media post that a large price spike for oil isn\u2019t likely in coming days, but emphasized the market focus on Iran.<\/p>\n \u201cNow, over the last 6 months we have seen a very large increase in Iranian supply due to weak enforcement of sanctions. As Iran is also behind Hamas\u2019 attacks on Israel, there is a good probability that the US administration will start enforcing those sanctions on Iranian oil exports more tightly,\u201d he wrote. \u201cThat would further tighten the oil market. Also the probability that this will lead to direct conflict with Iran is not zero.\u201d<\/p>\n Rising Iranian production has helped to fill a global gap between demand and supply. If sanctions are forcefully reapplied, \u201cprices will be substantially higher,\u201d Flynn said.<\/p>\n Meanwhile, The Wall Street Journal late Friday reported that Saudi Arabia had told the White House it would be willing to boost oil production next year if crude prices remained high, as part of an effort aimed at winning goodwill in Congress for a deal that would see the kingdom recognize Israel and in return get a defense agreement with the U.S.<\/p>\n A Saudi production cut of 1 million barrels a day that was implemented in July and recently extended through the end of the year has been given much of the credit for a rally that took global benchmark Brent crude
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\n within a few dollars of the $100-a-barrel threshold before retreating this past week. The U.S. benchmark
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