Netanyahu says it won't hit Iran's oil or nuclear targets; oil prices have plummeted!

According to the Washington Post, two familiar officials revealed that during the call, Israeli Prime Minister Binyamin Netanyahu told the Biden administration that he plans to attack Iran's military facilities rather than oil or nuclear facilities, which suggests that Israel will take a more limited counterattack to prevent the outbreak of a full-scale “war.” This is the first call since the tense relationship between Biden and Netanyahu continued for months.

Officials familiar with the matter say Israel's retaliation will be adjusted to avoid giving the impression of “political interference in the US election.” This shows that Netanyahu understands that the scope of the Israeli attack is likely to reshape the presidential campaign pattern. Affected by this news, international oil prices fell by 2 US dollars at the end of Monday, and the decline widened to 4.5% at one point. After opening on Tuesday, international oil prices continued their early morning decline. WTI crude oil fell $0.45 to 70.93 US dollars/barrel.

The Washington Post now seems to attribute this to Biden's diplomatic victory, reporting: “Describing the call between the two leaders, the US official said that Netanyahu's attitude during this discussion was more moderate than before. Both officials said that after Biden decided to send a strong missile defense system to Israel, the Israeli Prime Minister's position clearly softened.” Last weekend, it was reported that the US will send a Saad missile defense system to Israel to prevent Iran, which will include US military operators.

Rohan Reddy, head of international business development and corporate strategy at Global X Management, said, “The market's reaction may be to temporarily remove or reduce the geopolitical risk premium for oil.”

Crude oil prices have been on a roller coaster in recent weeks as traders track the prospects of the escalation of the Middle East conflict. As the geopolitical situation threatens production in this region, which supplies about one-third of the world's crude oil, the price of WTI crude oil has risen by about 8% this month. In recent months, Iran has produced around 3.3 million barrels of crude oil per day, making it OPEC's third-largest producer.

In the options market, traders have been preparing for Israel's response to Iran's October 1 ballistic missile attack. As far as WTI crude oil is concerned, the premium between call options and put options is the widest since the Russian-Ukrainian conflict broke out in 2022. Last week, the weekly trading volume of Brent crude oil options hit the second-highest in history, while the previous week set the highest weekly record.

Scott Shelton (Scott Shelton), an energy expert at TP ICAP Group Plc, said, “In my opinion, the fundamentals of the market are poor, but it is still constrained by geopolitics, and it is likely to continue to be the case.”

Iranian Foreign Minister Abbas Araghchi (Abbas Araghchi) visited Iraq last Sunday and visited Oman on Monday. The purpose of the trip was to stir up any retaliation against Israel in the region. He visited Saudi Arabia and Qatar last week. If Israel destroys Iran's most critical oil assets, it will cut nearly 2 million barrels of crude oil from the global market every day, leading some traders to speculate that oil prices will return to three digits. The last time oil prices broke through the $100 mark was shortly after the full-scale conflict between Russia and Ukraine broke out in February 2022.

Avner Cohen (Avner Cohen), professor of nonproliferation and terrorism studies at the Middlebury Institute of International Studies at Monterey (Middlebury Institute of International Studies at Monterey), believes that since the US presidential election is less than a month away, Washington will increase pressure on Netanyahu, and Israel's retaliation may be more symbolic, so as not to force Tehran to further escalate, thus involving neighboring Arab countries and the United States .

“Both countries (Iran and Israel) don't want to create a full-blown cycle of violence leading to a war of attrition.” He said, “This is bad for both countries. It may force the US to step in and bring more chaos to the Middle East. At the same time, there is no communication between the two sides, there is no clear red line, and there are very few interlocutors who can influence both sides. As a result, the possibility of errors is very high.”

In short, at a time when Israel is already at war on many fronts, particularly at a time when Lebanon is in military war with Iranian-backed Hezbollah, nothing is certain. In Netanyahu's security cabinet, there are still many hawks urging Israel to take tough countermeasures. Furthermore, Netanyahu has been talking about destroying Iran's nuclear program for years.