Oil slips but prices remain elevated after Saudi attacks

Prices surged nearly 20% in intraday trading on Monday in response to the attacks, the biggest jump in almost 30 years, before closing about 15% higher. Equities and other markets were also under pressure on Tuesday.

“The question is how long it takes for the supply to get back online,” said Esty Dwek, head of global market strategy at Natixis Investment Managers.

“However, the geopolitical risk premium, which has been basically ignored by markets in favour of growth worries in recent months, is likely to be priced in,” she said.

A gauge of oil-market volatility on Monday rose to the highest level since December 2018 and trading activity showed investors expect higher prices in coming months.

Japan said on Tuesday it would consider a co-ordinated release of oil reserves if necessary.

US President Donald Trump said on Monday it looked like Iran was behind attacks on the Saudi oil facilities but emphasised he did not want to go to war. Tehran has rejected the charges that it was behind the drone strikes.

Relations between the US and Iran have deteriorated since Trump pulled out of the Iran nuclear accord in 2018 and reimposed sanctions on its oil exports.

Washington also wants to put pressure on Tehran to end its support of regional proxy forces, including in Yemen where Saudi forces have been fighting Iran-backed Houthis for four years.