Oil sector experiences biggest jump in a year due to geopolitical tensions

Oil prices are currently experiencing a remarkable increase of 9 percent, driven by growing concerns that Israel might target Iranian oil infrastructures in retaliation for Tehran's recent missile attack. West Texas Intermediate futures exceeded the $74 per barrel mark, while the international benchmark Brent climbed to over $78. This price surge followed a notable rise of over 5 percent on Thursday, after U.S. President Joe Biden discussed a potential offensive against Iran's oil facilities, which currently have a capacity of over 3 million barrels per day. When asked about his support for such a move, Biden responded, 'We are having discussions about it.' On the same day, a Pentagon spokesperson reported that the U.S. is in discussions with Israel about possible responses to Iran, although no details about potential targets were revealed. JPMorgan analysts speculate that the U.S. government, given the upcoming elections, will not pursue rising oil prices, making an attack on Iranian oil facilities unlikely. JP Morgan analysts Natasha Kaneva and Prateek Kedia explained that an offensive is not Israel's preferred option, but rather a secondary or tertiary reaction to a potential escalation by Iran. Increased concerns about possible blockades of the Strait of Hormuz, a critical chokepoint for oil shipments, have further driven the prices. Bill Baruch, founder of Blue Line Futures, forecasts that prices could surpass the $80 mark for Brent in the event of a serious blockade, which is considered a critical turning point. The futures markets had already reacted with an increase on Tuesday, when Iran fired about 200 ballistic missiles in response to Israeli ground operations in southern Lebanon. Despite recent price movements, the reserve capacity of the OPEC+ oil alliance could keep prices in check. Recently, futures markets declined after Saudi Arabia, a leading member of the Organization of the Petroleum Exporting Countries, announced plans to lift voluntary production cuts later in the year, even if it leads to a decrease in oil prices.