OIL FUTURES: Crude soars as Israel-Iran conflict escalates

Crude oil futures were higher in mid-afternoon Asian trade June 13 as the escalating Israel-Iran conflict caused widespread panic in the complex.

At 3:15 pm Singapore time (0715 GMT), the ICE August Brent futures contract was up $3.41/b (4.92%) from the previous close at $72.77/b, while the NYMEX July light sweet crude contract was up $3.42/b (5.03%) from the previous close at $71.46/b.

"Overnight, more than 200 Israeli Air Force fighter jets, guided by precise intelligence from the Intelligence Directorate, struck over 100 targets across Iran, including the hideouts of senior operatives in the Iranian military leadership," the Israel Defense Forces said June 13 on their official Telegram channel.

In the latest development, three senior Iranian military commanders were taken out.

"The worsening Middle Eastern conflict raises the risk of not just disruptions to oil supplies from key producing nations but of contagion in other neighboring oil-producing nations too... The risk appetite of oil investors will likely be tested today with immense volatility and uncertainty, and how this would stretch," Priyanka Sachdeva, senior market analyst at Phillip Nova said.

Israel's defense minister declared a state of emergency June 13 following their preemptive strike against Iran as they expect retaliation from Iranian forces early.

"Markets are bracing for an escalatory spiral in the Israel-Iran conflict, sending oil soaring 10% to [approximately] $75/b intra-day... Iran has warned that it will respond harshly [to] Israel's unilateral airstrikes on Iran's nuclear and military facilities, as well as key personnel," Vishnu Varathan, managing director at Mizuho said.

Israel notably had a longstanding objective of eliminating Iran's nuclear program, and the latest attack appears to be a step toward that.

"Israel says Iran's nuclear program poses an existential threat and vows that its operation will continue for as long as necessary. Iran has already launched hundreds of drones in retaliation and could go further. But how much further?" Ipek Ozkardeskaya, senior analyst at Swissquote Bank said.

The US and Iran are expected to meet in Oman for a sixth round of nuclear negotiations June 15.

Some analysts noted that the panicked surge in crude oil futures prices may be an outsized reaction.

"Thinner trading volumes and ongoing uncertainty are causing caution in the oil markets, but the reaction seems disproportionate. Iranian oil barrels account for nearly 3% of global supplies, but they have been largely under sanctions and unavailable on the global market for a significant period," Sachdeva from Phillip Nova added.

Notably, US President Donald Trump's universal tariffs salvo has triggered fears of an oversupply, and OPEC+ still has spare capacity to ramp up production.

"However, the trading volumes on screen are lacking depth. Thinner volumes could have resulted in even greater price movements for short coverings and intensified price action," Sachdeva added.

Dubai crude

Dubai crude swaps and intermonth spreads were higher in mid-afternoon Asian trading June 13.

The August Dubai swap was pegged at $71.89/b at 2:05 pm Singapore time (0605 GMT), up $6.39/b (9.76%) from the previous Asian market close.

The July-August Dubai swap intermonth spread was pegged at $1.24/b, 36 cents/b wider over the same period, and the August-September Dubai swap intermonth spread was pegged at 88 cents/b, 26 cents/b wider.

The August Brent-Dubai exchange of futures for swaps was pegged at $2.60/b, $1.01/b wider over the same period.