Oil prices fall more than 3% as traders discount Iran-Israel war risk

Crude oil futures fell more than 3% Wednesday as the market dismissed the risk of a wider war between Israel and Iran that could disrupt supplies.

The West Texas Intermediate contract for May delivery lost $2.67, or 3.13%, to settle at $82.69 a barrel. June Brent futures were down $2.73, or 3.03%, at settle at $87.29 a barrel. U.S. oil and the global benchmark are down more than 3.4% for the week.

“Oil prices go about their business of unwinding some of the war premium that has been priced-in due to the continuing tensions surrounding the Gaza conflict and the subsequent Iranian missile onslaught on Israel,” John Evans, an analyst at oil broker PVM, wrote in a note Wednesday.

“It is hard to imagine that ‘cooler heads prevail’ can be associated with this eons-long strife, but thus far Israel has adhered to the international calls of showing restraint,” Evans said.

The hostilities in the Middle East have not led to a supply disruption, and Israel is unlikely to respond by hitting an oil producing or exporting facility in Iran, said Andrew Lipow, president of Lipow Oil Associates.

“Theories of Iran-Israel tension disrupting oil supplies have fizzled out,” said Manish Raj, managing director of Velandera Energy Partners. “Peace may have come to an end, but oil continues to flow,” he said.

U.K. Foreign Secretary David Cameron said earlier in the day that “it’s clear the Israelis are making a decision to act” against Iran.

“We hope they do so in a way that does as little to escalate this as possible,” Cameron told reporters in Jerusalem before meeting with Israeli officials.

Iranian President Ebrahim Raisi warned Wednesday that a counterattack by Israel would be met with a “massive and harsh” response.