Global crude oil prices continue to decline following reports that Israel is unlikely to target Iran’s oil infrastructure in its ongoing conflict.
This development has calmed fears of a major disruption in oil supply, shifting traders’ focus to the International Energy Agency’s (IEA) forecast of a potential oil market surplus by early 2025.
Impact on Oil Prices
Crude prices have been fluctuating dramatically due to escalating tensions in the Middle East, a region that supplies nearly one-third of the world’s oil.
Speculation over Israel’s possible retaliation against Iran intensified after ballistic missiles were launched from Iran on October 1. Reports initially suggested that Israel might strike Iran’s strategic oil, gas, and nuclear infrastructure, raising concerns about a severe disruption in global oil production.
Speculation Over Israel’s Retaliation and U.S. Intervention
However, recent reports indicate that Israel may refrain from targeting these facilities and instead focus on military infrastructures. In a brief statement, Netanyahu’s office stated: “We listen to the opinions of the U.S. but we will make our final decisions based on our national interests.” This response was issued on Tuesday in reaction to press inquiries regarding a story in the Washington Post.
The situation has been further influenced by U.S. intervention, with President Joe Biden announcing that the U.S. would not support Israeli strikes on Iran’s key energy infrastructures, including nuclear sites. While Netanyahu reportedly emphasized that military targets are more likely, he maintained that Israel would ultimately act based on its own assessments.
IEA Forecasts and Market Reactions
Despite the geopolitical risks, the IEA’s warning of an oil surplus in early 2025 tempers market anxieties.
The agency has made minor downward revisions to its demand growth forecasts and noted that spare capacity within OPEC+ remains at near-record levels, indicating a buffer that could prevent a significant supply shock in the near term. The evolving situation in the Middle East remains a critical factor for oil markets, but the prospect of a future surplus has offered some relief to traders.
