Oil prices swung wildly on Monday, hit by a mix of conflicting factors: a drop caused by a broad stock market sell-off and a rise caused by fears of possible Iranian retaliation against Israel.
Brent crude, the world’s main price benchmark, fell to a low of $76.05 in the morning before fluctuating throughout the day to close above $77 on Monday afternoon, while U.S. West Texas Intermediate crude fell 58 cents to $72.94.
The market saw a broader selloff on Monday, with the Dow Jones Industrial Average dropping 1,000 points and the broader market down 3%. The drop was blamed on a number of factors, including a weak July jobs report on Friday and a rise in the unemployment rate, raising concerns about a broader economic slowdown. The report came just after the Federal Reserve declined to cut interest rates even after inflation had fallen.
Meanwhile, oil prices have barely responded to tensions in the Middle East since the Oct. 7 attacks by Hamas and the ensuing Gaza war. But last week, a top Hamas leader was assassinated in Iran, likely by Israel. Iranian leaders have vowed to retaliate. That retaliation, which may come at any time, is unlikely to cause a long-term shock unless there is also a broader disruption of oil supplies.
Earlier this year, Iran launched its first non-proxy attack on Israel in retaliation for an Israeli attack on the Iranian consulate annex in Syria. That attack appears to have ended without further escalation, and market reactions to new Iranian attack threats appear to be anticipating a similarly limited attack.
U.S. gasoline prices hit an all-time high in the summer of 2022, but already rising prices were pushed up even further by Russia’s invasion of Ukraine.
The Biden administration has limited ability to directly influence gasoline prices, but a late-summer price surge could be a negative for Vice President Harris, the Democratic front-runner.
