The Iranian drone and missile attack on Israel has added stress to oil markets, but the attack was already reflected in oil prices due to increased geopolitical risk premiums. Most of the increase in oil prices is due to geopolitical concerns rather than supply risks. Saudi Arabia and OPEC+ have 5 million barrels per day of supply that can be returned if prices overheat and spike above $100 a barrel. The major risk for the oil markets is a limited retaliation for the earlier Israeli strike on the Iranian embassy in Syria. The US and other Group 7 countries are urging Israel to consider its defense against the strike as a success and not retaliate. US increases in oil production are an increasing counterweight to a potential conflagration in the Middle East.
