Oil prices hover near two-week lows as markets expect little response from Israel to Iran's attacks

Global oil prices fell in American trade on Tuesday, approaching two-week lows as the US now expects little response from Israel to the unprecedented Iranian attack on Israel soil. 

Now traders await initial data on US crude stocks later today from the American Petroleum Institute, expected to show a buildup.

Prices 

US crude prices fell 1% to $84.83 a barrel, with a session-high at $86.14, while Brent prices fell 1.05% to $89.56 a barrel, with a session-high at $90.80. 

US crude rose 0.25% on Monday, while Brent rose 0.2%, away from two-week lows at $84.08 a barrel and $88.76 a barrel respectively. 

Limited Israeli Response to Iran 

Four US officials said to the NBC News network they expect the Israeli response to the Iranian attack to be limited, and will likely focus on striking Iranian surrogates outside Iran.

Israel’s war council convened on Monday to consider the response to Iran, which would be “imminent” according to military officials. 

The Israeli Army’s leader Herzi Halevi thanks the US and Britain for helping strike down over 300 missiles and drones aimed at Israel.  

Leaders of Britain, France, and Germany called Israel to avoid escalation following the Iranian attack, with US President Joe Biden asserting his country’s support for Israel, but asserted it won’t join a retaliation attempt against Iran. 

US Stocks

The American Petroleum Institute will release initial data on US crude stocks later today, expected to show another buildup last week.

Analysis 

RBC Capital Markets’ analysts believe the war will likely be contained if the Israeli government followed the advice of the US government and avoided an escalation. 

The oil markets will remain on guard to monitor any such developments in the highly torn and war-driven region of the Middle East.