Brent crude jumped 1.4 percent to $69.21 per barrel in the middle of the Asian trade as two bases hosting US troops in Iraq were hit by ballistic missiles.
So-called safe haven assets, like gold and the Japanese yen, also rose on the news.
The attack happened just hours after the funeral service for Iranian commander Qasem Soleimani, who was killed by a US drone strike on Friday.
Iranian state television said the attack was a direct retaliation for the killing of Soleimani.
As concerns rise that the conflict between the US and Iran could escalate further, experts discussed the potential oil price ramifications in the latest episode of AB Live, from sister publication Arabian Business.
Edward Bell, director of commodities research at Emirates NBD, said that the oil price spiked directly in reaction to the ‘geopolitical situation in the Middle East’.
“However, unlike the direct drone attack on Aramco’s facilities in September, there hasn’t so far been any change to the region’s physical oil infrastructure – the [Soleimani killing] was not an attack on tanks or pipelines.
“So the oil price jump is really more a reflection of anxiety in the market more than pricing in physical disruption to barrels,” Bell told AB Live TV.
“Right now, it’s more of a perception issue. There is no impact currently in production capacity,” he said.
According to Bell, once global investors become accustomed to “new levels” of geo tension, the market will return to “looking at fundamentals”.
“We think 2020 is actually going to be a little soft for oil. We see a decline in the price in 2020,” he said.
Ranjith Raja, head of MENA Oil & Shipping Research, Refinitiv, told AB Live TV that any price spikes based on ‘perception’ are usually short-lived.
“The oil price shot beyond $100 a barrel on Sunday [following Soleimani’s death] but it’s been going down since then. The spikes are short lived. There is nothing that has changed in the fundamentals on the supply or demand side that warrants any immediate reaction in terms of the price points for these markets,” Raja said.
