Oil jumps after Iran missile attack on Israel; Iran oil assets could be retaliation target

Crude oil futures powered higher Tuesday by Iran’s missile attack on Israel, in a move considered to be a significant escalation of Middle East tensions that may ultimately threaten global crude supplies from the region.

Iran fired ~200 missiles at Israel with minimal damage on the ground and no apparent direct casualties, as most of the missiles were intercepted; U.S. officials said Iran’s attack had been “defeated.”

But Israel’s military signaled it would retaliate, although it did not provide details of how or when it would respond.

Energy markets have been relatively sanguine even after months spiraling violence in the Middle East, but that would change if a broader war disrupts Iranian oil shipments through the Strait of Hormuz.

Some analysts think Iran’s oil assets may be on the target list for any Israeli retaliation, and an attack on Iranian oil production or export facilities could cause a material disruption, possibly more than 1M bbl/day.

Before Iran’s attack, the oil market had concluded its worst-performing quarter this year, as the outlook for increased supplies and tepid global demand growth outweighed Middle East fears.

Front-month Nymex crude (CL1:COM) for November delivery surged as much as 5% before settling +2.4% to $69.83/bbl, and front-month December Brent crude (CO1:COM) finished +2.6% to $73.56/bbl, the best levels for both benchmarks since September 24.

Meanwhile, front-month November Nymex natural gas (NG1:COM) closed -0.9% to $2.896/MMBtu.

ETFs: (NYSEARCA:USO), (BNO), (UCO), (SCO), (USL), (DBO), (DRIP), (GUSH), (USOI), (UNG), (BOIL), (KOLD), (UNL), (FCG)

Energy-related stocks (XLE) comprised eight of the day’s top 15 gainers on the S&P 500: APA Corp. (APA) +4.9%, Conoco Phillips (COP) +3.9%, Marathon Oil (MRO) +3.8%, Vistra (VST) +3.4%, Occidental Petroleum (OXY) +3.3%, EOG Resources (EOG) +3.3%, Halliburton (HAL) +3%, Diamondback Energy (FANG) +2.9%.

Oilfield service costs for U.S. shale drillers are expected to rebound in 2025, clawing back some of this year’s decline, industry consultant Enverus said in a new report.

Per-well costs for shale operators are forecast to fall 6.3% in 2024 but rise 2.8% next year as drilling accelerates, according to Enervus.

“We believe activity has bottomed and oilfield service prices will bottom by the end of this year,” Enervus analyst Mark Chapman said. “An oversupply of fracture sand caused prices to fall this year, but an expected rebound in gas-directed drilling and a trend to longer laterals should boost prices in 2025.”