Why Oil Traders Are Not Freaking Out Today

Iran and Israel’s proxy conflict escalated into direct strikes over the weekend and oil prices have hardly budged. So far on Monday, the Brent crude oil benchmark is hovering around $89.50 a barrel, a 1-ish% dip for the day.

This has been the story of the conflict so far: While oil prices rose following Hamas’s October 7 attack on Southern Israel and the beginning of Israel’s invasion of Gaza, they’re now back to where they were for much of September, and are down substantially from their summer 2022 highs.

It remains to be seen how, exactly, Israel will respond to the attack by Iranian drones , but oil markets are still largely relaxed. By the end of last week, explained Eurasia Group analyst Greg Brew, the markets had already “priced in” an Iranian attack, pushing prices above $90.

Brew pointed to both the United States and Iran indicating that “further escalation is being actively discouraged” as one cause for the market’s relative relaxation so far today.

“The market is down a bit, though there is still a lot of anxiety regarding whether Israel’s response to the attack creates more escalatory pressure,” he told me. “So we’re still in a wait-and-see pattern.”

Despite the escalation, oil markets apparently still don’t see the conflict spinning out of control. “Crude essentially unchanged to start the week,” oil analyst Rory Johnston tweeted Sunday. “Iran’s reaction perfectly priced in.”

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