Oil prices rise with focus on Israel response to Iran attack

Investing.com-- Oil prices rose in Asian trade on Tuesday, coming close to six-month highs amid persistent concerns over a crisis in the Middle East after a report said that Israel’s response to an Iranian attack may be imminent. 

Geopolitical tensions in the Middle East ramped up over the weekend after Iran launched a large-scale drone and missile strike against Israel. Oil prices had initially fallen in response to the strike, given that it caused minimal damage and as Iran also signaled that it was done attacking Israel.

But the prospect of an Israeli response fed into fears that tit-for-tat measures between the two countries could lead to all-out war in the Middle East. 

Brent oil futures expiring in June rose 0.5% to $90.59 a barrel, while West Texas Intermediate crude futures rose 0.6% to $85.90 a barrel by 20:34 ET (00:34 GMT). 

Israel response to Iran attack may be imminent- NBC 

NBC news reported on Monday that Israel was considering an "imminent" response to Iran’s recent strike. Other reports showed that Israel's war cabinet had met over the weekend without reaching consensus on a response.

The report came as Iran and Israel locked horns at an emergency meeting of the United Nations Security Council, amid growing calls from world leaders for restraint.

Iran said it did not seek further escalation with Israel, but warned against any retaliatory attacks. 

Tensions between Iran and Israel have been a key point of support for oil prices, as traders bet that a widespread conflict in the Middle East will disrupt supply from the oil-rich region. 

Iran in particular is a member of the Organization of Petroleum Exporting Countries, and is a key producer in the Middle East. 

Demand cues, interest rates still in focus 

Beyond supply concerns, markets were still watching for more cues on oil demand, especially with first-quarter gross domestic product data from China due later in the day. The reading is expected to show GDP grew 4.8% in the first quarter, slower than the government’s 5% annual target. 

China is the world’s biggest oil importer, with any economic cues from the country likely to factor into the outlook for oil demand. 

Strength in the dollar limited any major gains in oil prices, as the greenback shot up to over five-month highs amid growing conviction that the Federal Reserve will not cut interest rates in the first half of 2024.