Iran and Israel Resume Missile Strikes, Pushing Brent Crude Above 96 Dollars

The uneasy ceasefire between Iran and Israel broke down on Monday before both governments pulled back within hours. Iran fired repeated missile salvos at Israel, and Israel said it struck military targets and a petrochemical complex inside Iran, the New York Times reported. It was the first exchange of strikes since a truce took hold two months ago. By later in the day Iran announced that it had ended its military operations, while warning of larger attacks if Israel resumed strikes on Lebanon, and President Trump said he had pressed Prime Minister Benjamin Netanyahu of Israel to stop and that the two sides were now seeking an immediate ceasefire.

The effect on energy markets was immediate but brief. Brent crude climbed more than 4 percent to above 96 dollars a barrel as traders accounted for the renewed risk to Gulf oil supply, then pared most of that gain to about 94 dollars after Iran said it had halted operations. A source in Iran's Islamic Revolutionary Guard Corps (IRGC) had warned that any further attacks on Iranian energy infrastructure would bring strikes on energy assets across the wider region, after Israel hit the Karun petrochemical plant in Khuzestan and the IRGC said it had responded by striking facilities in Haifa.

The two governments described the day differently. Israel said it intercepted incoming missiles with no casualties and warned that it would respond to any further attacks. Iran's foreign ministry blamed shifting United States positions for disrupting the diplomatic process. The European Union, meanwhile, has moved to sanction Iranian individuals and entities tied to the restriction of navigation through the Strait of Hormuz, its first use of that legal framework over freedom of the seas, the bloc's foreign policy chief Kaja Kallas said.

The Strait of Hormuz, which carries roughly a fifth of the world's oil and liquefied natural gas, has been largely closed since late February. Even with strikes halted for now, each renewed exchange increases the risk premium that markets attach to oil prices.