Oil prices slip after rallying to highest in over a month

A rally in oil prices took a break on Tuesday as the market waited for Israel’s response to last week’s Iranian rocket attacks that prompted a price surge on concerns of a broader conflict in the Middle East.

Brent crude futures fell $1.60, or 2 percent, to $79.33 per barrel by 12:18 GMT. US West Texas Intermediate futures also fell $1.60, or 2.07 percent, to $75.54 a barrel.

Fighting intensified after Iran-backed Hezbollah fired rockets at Israel’s third-largest city, Haifa, and Israel looked poised to expand its offensive into Lebanon, a year after the Hamas attack on Israel that sparked the Israel’s ongoing war in Gaza.

Both contracts rose over 3 percent on Monday to hit their highest levels since late-August, adding to last week’s rally that saw them rise by over 8 percent for the biggest weekly gains in over a year.

• Oil prices up after strongest weekly rise in over a year
• Fears for Strait of Hormuz oil gateway in Iran-Israel face-off
• Iran’s energy installations may be targeted in Israeli strikes

The rally began after Iran launched a missile barrage on Israel on October 1. Israel has sworn to retaliate and is weighing its options, with Iran’s oil facilities considered a possible target.

However some analysts believe that an attack on Iranian oil infrastructure is unlikely and have warned that oil prices could face considerable downward pressure if Israel focuses on any other target.

Even if an attack targets Iranian oil facilities, there is 7 million barrels per day of spare supply capacity within Opec to make up for any loss of oil output, ANZ Bank analysts noted on Friday.

Meanwhile Hurricane Milton intensified on its way to Florida, forcing at least one oil and gas platform in the US Gulf of Mexico to shut on Monday.

US crude oil inventories were expected to rise by 1.9 million barrels last week, according to a preliminary Reuters poll.