WTI rises on Iran attack against Israel

U.S. crude oil prices rose more than 2% on Tuesday, coming off session highs as traders assessed whether a missile attack by Iran against Israel would lead to further escalation in Middle East.

“There has been a lot of complacency about this war,” Helima Croft, head of global commodity strategy at RBC Capital Markets, told CNBC’s “The Exchange.” Traders have largely dismissed the threat of oil supply disruptions from simmering tensions in the Middle East, she said.

The question now is whether Israel might target Iran’s nuclear facilities or oil infrastructure in response to the attack, Croft said. Iran is producing at a five-year high of over 3 million barrels per day, she said.

“We do need to think about a scenario where Iranian oil supplies are at risk,” Croft said.

Here are Tuesday’s closing energy prices:

• West Texas Intermediate November contract: $69.83 per barrel, up $1.66, or 2.44%. Year to date, U.S. crude has fallen more than 2%.
• Brent December contract: $73.56 per barrel, up $1.86, or 2.59%. Year to date, the global benchmark has dropped more than 4%.
• RBOB Gasoline November contract: $1.9666 per gallon, up 1.63%. Year to date, gasoline has pulled more than 6%.
• Natural Gas November contract: $2.896 per thousand cubic feet, down 0.92%. Year to date, gas has gained more than 15%.

The Israel Defense Forces identified about 180 missiles fired from Iran toward Israel. Most of the missiles were intercepted, though several hits have been identified, an Israeli security official told NBC News.

The IDF is assessing the situation and is not currently aware of any casualties, said military spokesman Daniel Hagari.

“This attack will have consequences,” Hagari said. A senior White House official told NBC News earlier that the U.S. would help defend Israel and warned Iran that an attack would “carry severe consequences.”

Tensions in the Middle East have dramatically escalated over the past week, as Israel has pounded the Iran-backed militia Hezbollah with airstrikes, killing the group’s leader, Hassan Nasrallah. Israel dispatched ground forces into southern Lebanon on Tuesday.

Oil market and geopolitical analysts have repeatedly warned this year that an Israeli incursion into Lebanon could be the trip wire that leads to a regional war with Iran, increasing the risk of crude supply disruptions.

The impact on the oil market will depend on the “scope and damage” caused by an Iranian attack, which in turn will drive Israel’s response, said Bob McNally, president of Rapidan Energy.

Iran and Israel came to blows in April but ultimately backed away from a full-blown conflict. Iran launched hundreds of ballistic missiles and drones against Israel, after the government of Prime Minister Benjamin Netanyahu struck an Iranian diplomatic compound in Syria.

The U.S., Israel and other allies foiled Iran’s April missile attack, giving the Netanyahu government room for a small retaliatory strike in Iran that did not lead to a further cycle of escalation.

McNally said “the crude risk premium should quickly dissipate” if there is a repeat of “April’s failed Iranian and restrained Israel exchanges.”

The analyst cautioned, however, that Israel has increasingly adopted a “three eyes for an eye” approach to attacks from regional enemies.

“If Iran attacks and causes damage, then the escalatory cycle could leg up quicker to sustain and even increase a geopolitical risk premium,” McNally said.