VINACHEM

Oil prices were falling early Monday after Iran’s drone attack on Israel over the weekend.

That might seem unusual, given that tensions in the Middle East are now as high as they’ve been in years. But the fact that the strike was intercepted and caused only minimal damage was a relief.

The feeling may not last. The question now is how Israel responds. Tension in the Middle East tends to push oil prices higher because so many of the world’s largest producers, including Saudi Arabia, are in the region. Iran itself produces some 3 million barrels of oil a day.

If a direct confrontation between the U.S. and Iran emerged, oil prices may surge above $140 a barrel, said Benjamin Hoff, head of commodity research at Société Générale. After the weekend, the odds of such a confrontation climbed to 15% from 5%, he said.
“Geopolitics has returned as the biggest concern for markets,” said Deutsche Bank strategist Jim Reid. “But since markets have reopened after the weekend, the reaction among key assets has been subdued.”

Oil prices had risen on Friday amid warnings that some kind of attack was imminent. The modest impact of the strike and the lack of any impact on oil supplies are bringing prices back down for now. But there’s still a risk that the conflict escalates into a wider regional war.

West Texas Intermediate, the U.S. benchmark, dropped 0.7% to $85.07 a barrel. Brent crude, the international standard, fell 0.6%% to $89.90 a barrel. Both contracts are down over the past five days, but remain more than 15% higher than at the start of the year.

Shares of big oil companies were mixed early Monday. Exxon Mobil stock added 0.3% in the premarket, as did Chevron. U.K.-based BP’s American depositary receipts were little changed. Shell’s was up 0.3%.   –MSN  –