Oil Prices Edge Up Slightly Amid Awaited Iranian Response to U.S. Strikes

U.S. benchmark oil prices were just modestly up Monday morning, reflecting investors' shift to a wait-and-see mentality as they assess Iran's response to US nuclear facility strikes.

The 0.2% increase in West Texas Intermediate oil futures, to less than $74 a barrel, reflected a significant overnight pullback from the roughly 4% jump recorded Sunday evening when commodities futures trading began.

Stocks opened flat.

The current oil price is the highest since late January, yet it is still marginally lower than the general average recorded since 2023.  It would amount to gasoline costs of around $3.30 per gallon, assuming oil prices remain at current levels. 

That would be a central assumption.

Wall Street analysts argue that by ordering the strikes, President Donald Trump has introduced huge uncertainty into markets, as he has done previously with his on-again, off-again tariff proposals.

"There is, in our view, a wide range of outcomes for oil prices in the next few weeks," analysts with UBS financial group wrote in a note to clients.  "The nature and extent of Iranian retaliation remains the key parameter."

If the Iranian response remains modest, oil prices may fall again, according to analysts.

However, the US strikes have likely increased the danger of interruptions to Middle Eastern energy infrastructure, they added.  If such a disruption occurred, oil prices would rise sharply in the short term.

"Everyone, keep oil prices down.  I'm watching!  YOU ARE PLAYING DIRECTLY INTO THE HAND OF THE ENEMY.  "Don't do it!"  Trump took to social media Monday morning.  

The key question is if Iran will block or cut off passage to the Strait of Hormuz, a chokepoint in the Persian Gulf through which approximately one-fifth of the world's oil supply passes.  Iran's state-owned media stated that Iran's parliament supported closing the strait, but the final decision rests with Iran's national security council, according to the article.  There was no information that such an order had been issued.

"The strait is critical for Iran's own exports as its terminal outside of the Strait only has limited capacity," according to the analysts.  "A closure would also have a material negative impact for several other countries such as Qatar and China and would likely present a challenge for Iran."

Analysts at ING Financial Group identified four potential paths for Iran: full escalation that includes other countries such as China or Russia; interruption of the Strait of Hormuz; active or passive backing for terrorist strikes in the United States and Europe; or no action at all.

"We will abstain from speculating about the next steps and instead conclude that the most likely economic consequences from the US strikes will be on general uncertainty and on the price of oil," according to the ING economists.