Oil sinks on de-escalation hopes despite Iran strike

LONDON, United Kingdom — World oil prices sank Monday as traders bet on de-escalation in the Middle East despite a strike on Israel by key crude producer Iran.

Brent and WTI prices shed 1 percent while global stock markets diverged.

Iran late on Saturday unleashed more than 300 ballistic and cruise missiles and attack drones — which were mostly repelled by air defenses — in retaliation for Israel’s bombing of its Syrian consulate earlier this month.

Tehran said the aerial strike was a legitimate defensive response to the deadly attack in Damascus, adding that “the matter can be deemed concluded”.

READ: Iran strikes to boost oil prices, but maybe not for long, analysts say

Israel, the United States, and other allies intercepted nearly all launches in the attack — which had been widely trailed and was the first direct Iranian military action against arch-foe Israel.

Haven investment gold held firm Monday after reaching a record peak of $2,431.52 before the weekend.

The dollar steadied after touching a 34-year high against the yen.

“The market sees de-escalation as the most likely path despite the Iranian strike,” noted analysts at DNB Markets.

‘Minor damage, no casualties’

“The attack was well announced, with Israel and its allies fully prepared, it caused minor damage and no casualties, and with Iran quickly out saying that ‘the matter can be deemed concluded’. A clear invitation to de-escalate.”

Experts said the limited scope of the attack showed Iran was seeking to make a show of strength with its attack, but without sparking a conflict.

READ: Biden says US helped Israel down ‘nearly all’ Iran drones, missiles

US President Joe Biden was reported to have cautioned Israeli Prime Minister Benjamin Netanyahu to “take the win” and forego a counterattack.

Nevertheless, Asian equities mostly fell Monday on fears of a broader conflict in the volatile Middle East, although Shanghai stocks jumped higher on news of fresh regulatory measures that could help its long-term performance.

“All eyes remain on whether there will be any response from Israel and markets will likely be volatile in the day ahead to any geopolitical headlines,” said Saxo analyst Redmond Wong.

In Europe, London equities lost ground, but Frankfurt and Paris both rallied as data showed a strong turnaround in eurozone industrial production for February.

Traders meanwhile remain worried about the outlook for US interest rates following more forecast-beating inflation and jobs data.