Oil prices rise as the market waits for an Israeli attack on Iran

U.S. crude oil rose more than 3% on Monday as the market waited for Israel to attack Iran.

Oil prices surged last week on fears that Israel could attack Iran's oil industry in retaliation for the ballistic missile attack in Tehran.

The US benchmark West Texas Intermediate rose 9.09% last week, marking its biggest weekly increase since March 2023. Global benchmark Brent rose 8.43%, posting its biggest weekly gain since January 2023.

Here are the closing energy prices from Monday:

• West Texas Middle School November contract: $77.14 a barrel, up $2.76 or 3.71%. Year-to-date, U.S. crude oil is up more than 7%.
• Brent December contract: $80.93 a barrel, up $2.88 or 3.69%. Year to date, the global benchmark is ahead by around 5%.
• RBOB gasoline November contract: $2.1538 per gallon, up 2.77%. So far this year, the price of gasoline has risen by more than 2%.
• natural gas November contract: $2.746 per thousand cubic feet, down 3.78%. Year-to-date, gas has a lead of more than 9%.

President Joe Biden on Friday advised Israel against attacking Iranian oil facilities after prices rose about 5% a day earlier as the president suggested the U.S. was discussing the possibility of such an attack. Biden has also said he opposes Israel attacking Iran's nuclear facilities.

It's still unclear what form Israel's retaliation will take, said Helima Croft, head of global commodities strategy at RBC Capital Markets. The impact on the oil market would be significant if Israel attacked Kharg Island, through which 90% of Iran's crude oil exports pass, Croft said.

“We really need to see what the Israelis hit, what the Iranian response mechanism would be,” Croft told CNBC's “Worldwide Exchange” on Monday. “But we haven’t come any closer to a regional war for a long time.”

The market is currently only pricing in the possibility of Israel attacking Iran's oil facilities, but that's not the worst-case scenario, Alan Gelder, vice president of oil markets at Wood Mackenzie, told CNBC's “Squawk Box Europe” on Monday.

The worst-case scenario is a disruption in the Strait of Hormuz, through which 20% of global crude oil exports flow, Gelder said. Iran could target the strait in response to an Israeli attack, which would have a far more dramatic impact on crude oil prices, the analyst said.

The war between Israel and Hamas in Gaza has been going on for a year now and there is no end in sight. The conflict increasingly escalated into a multi-front war in the Middle East. Israel is fighting Hezbollah in Lebanon and has attacked Houthi fighters in Yemen in connection with rocket attacks by those groups.

Hamas, Hezbollah and the Houthis are allied with Iran. The war in the Middle East has not yet led to a disruption in crude oil supplies, but analysts warn that the risk increases as the conflict drags on.