Analysts warn that oil prices could drop to their lowest levels since the pandemic if Middle East tensions continue to ease.
Oil prices declined following Israel’s airstrike on Iran, which strategically avoided critical energy infrastructure, reducing fears of an extensive conflict. The strikes on Saturday targeted military sites in Iran, responding to Tehran’s missile barrage on October 1, itself retaliation for the deaths of Iran-backed militant leaders and a Revolutionary Guards commander.
Iran has since downplayed the impact, claiming only “limited damage” to radar systems, indicating a reluctance to escalate further.
As a result, Brent crude, the global benchmark, has dropped over 6% to around $71 per barrel, while West Texas Intermediate (WTI), the U.S. benchmark, fell approximately 6% to $67 per barrel.
Stephen Innes, analyst at SPI Asset Management, noted that oil prices could fall even further if regional geopolitical tensions continue to ease, stating, “If tensions cool further or peace talks gain unexpected traction, we could see oil slide down to $60 per barrel, especially if China’s economic stimulus disappoints, refocusing traders on the anticipated 2025 supply glut.”
The last time Brent crude reached $60 per barrel was in February 2021.
Arne Lohmann Rasmussen, chief analyst at A/S Global Risk Management, added that while there could be “further short-term downward pressure” on oil prices, most of the geopolitical risk premium is “already priced out,” with strong support around $70 per barrel.
