Market News

(Bloomberg) -- Oil was little changed after rising earlier, with traders waiting for clues on how Israel will respond to an unprecedented attack by Iran. 

Global benchmark Brent was trading near $90 a barrel. Top Israeli military officials said their country had no choice but to respond to Tehran’s weekend strike, even as European and US officials called for restraint. 

Those comments led to a fresh round of bidding in the oil options market late Monday. Bullish calls on the global benchmark are trading at the biggest premium to bearish puts since October and the volume of contracts that profit from higher prices set a fresh record. 

Traders are now increasingly focusing on the nature and timing of the next Israeli move. Western and Arab nations are trying to convince Prime Minister Benjamin Netanyahu that an aggressive reaction to Iran’s assault would harm Israel’s interests. The Middle East accounts for about a third of global crude supply.

“The crucial question now is how Israel will respond,” Commerzbank analysts Thu Lan Nguyen and Carsten Fritsch wrote in a report. “If Israel refrains from a retaliatory strike, the situation is likely to calm down. In the other case, a further reaction from Iran could be expected, which could set off a spiral of escalation.”

Oil has rallied this year, with OPEC+ supply cuts and elevated geopolitical risks in Russia and the Middle East lifting prices. Consumption has also been running at a good clip in leading economies, with data Tuesday showing China’s first-quarter growth beat expectations as oil demand expanded. In addition, there have been signs of strength in some products, including US gasoline.

Oil’s advance — Brent is now about 17% higher this year — has come despite a steady strengthening of the US dollar, with a Bloomberg gauge of the currency climbing to the highest level since mid-November. Typically, that can be a headwind for commodities including crude.