Oil prices whipsawed Monday, affected by the conflicting drivers of a widespread stock market selloff pushing them down and anxiety about potential Iranian retaliation against Israel pushing them upward.
Brent crude, the top global price benchmark, fell as low as $76.05 in midmorning, but after rising and falling for much of the day, closed past $77 Monday afternoon. Meanwhile, U.S. West Texas Intermediate crude was down to $72.94, a 58-cent drop.
Markets saw a wider decline Monday, including a thousand-point tumble in the Dow and an overall 3 percent market decline. The drop has been attributed to multiple factors, including Friday’s lukewarm jobs report for July and an increase in the unemployment rate, triggering fears of a broader economic slowdown. The report came shortly after the Federal Reserve declined to cut interest rates even after inflation fell.
In the meantime, oil prices have been minimally receptive to the tensions in the Middle East since Hamas’ Oct. 7 attack and the subsequent war in Gaza. However, last week a top Hamas leader was assassinated on Iranian soil, presumably by Israel, prompting Iranian leaders to vow retaliation. That retaliation, expected anytime, is unlikely to cause longer-term shocks without a broader disruption in the oil supply.
Earlier this year, Iran conducted its first non-proxy strike against Israel in response to an Israeli strike on an Iranian consulate annex in Syria. The back and forth seemingly ended without further escalation, and the market reaction to the threat of another Iranian strike seems to anticipate a similarly limited exchange.
U.S. gas prices hit all-time highs in summer of 2022, with already-climbing prices sent higher by Russia’s invasion of Ukraine.
Although the Biden administration’s ability to directly affect gas prices is limited, a late-summer spike could be a liability for Vice President Harris, the presumptive Democratic nominee.
