Morning Highlights: Oil jumps over 7% after Israel's strikes on Iran

Market Snapshot (as of 06:30 EST)

• Brent (Aug): $75.13 (+$5.77 | +7.4%)

• WTI (July): $74.01 (+$5.97 | +7.5%)

Oil prices surged more than 7% Friday morning, posting their largest one-day rally since Russia's invasion of Ukraine in 2022, as markets reacted sharply to Israel’s wide-ranging strikes against Iranian nuclear infrastructure and Tehran's retaliatory drone attacks. The spike in geopolitical tension has ignited fears of supply disruptions in the world's most critical oil shipping corridor — the Strait of Hormuz.

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Key Developments

Israel Launches Strikes on Iran's Nuclear Program

• Israel launched coordinated attacks targeting Iran’s Natanz enrichment facility, missile factories, air defense systems, and top military officials.

• Among the dead were high-ranking Iranian commanders including Mohammad Bagheri, Iran’s military chief, marking a major blow to Tehran's leadership structure.

• Prime Minister Netanyahu called the strikes a “last resort” to prevent a nuclear-armed Iran.

• Iran’s Natanz facility sustained confirmed damage; no radioactive contamination has been detected, according to Iranian authorities.

Iranian Retaliation Underway

• Iran launched approximately 100 drones toward Israel early Friday, reportedly in direct response to the attacks.

• Israel’s defense systems are engaged, with no significant damage reported yet.

• Iranian Supreme Leader Ayatollah Khamenei vowed “harsh punishment,” fueling fears of a broader regional conflict.

Strait of Hormuz Risk Intensifies

• While no oil flows have been disrupted yet, concerns are mounting. Roughly 20% of the world’s oil supply — or nearly 19 million barrels per day — passes through this narrow chokepoint.

• Analysts warn of a worst-case scenario in which oil prices spike above $120–130 per barrel if regional flows are disrupted, particularly from Iran, Iraq, Saudi Arabia, and the UAE.

U.S. Response and Diplomatic Fallout

• U.S. Secretary of State Marco Rubio emphasized that Washington was not involved in Israel’s strikes and warned Iran not to retaliate against American assets.

• The U.S. has begun a partial withdrawal of diplomatic personnel and military dependents from Iraq and Bahrain.

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Market Analysis

"Oil's $10 Rally Still Not Pricing Actual Supply Disruption"

• Brent and WTI have gained more than $10 this week, yet traders note the rally does not yet reflect any confirmed production or export loss from Iran or others in the region.

• Barclays’ Amarpreet Singh: “This rally is entirely risk-premium driven… if production or transit is impacted, this could turn into a structural price shift.”

• Rystad’s Janiv Shah: “OPEC+ spare capacity can serve as a stabilizer, but the market will price in further risk until the regional outlook clarifies.”

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Broader Market Reaction

• Stocks sold off globally as risk aversion soared; S&P 500 futures fell sharply in pre-market trade.

• Safe havens surged: Gold rallied above $2,400/oz; the Swiss franc gained vs. all major currencies.

• Gasoline prices in Asia and Europe jumped, with refiners expected to reassess sourcing strategies should Hormuz be compromised.