Why the oil market is shrugging off concerns about Israel, Iran

Oil prices (CL=F, BZ=F) are relatively flat despite concerns about an Israeli response to Iran's aerial attack over the weekend. Given that the attack was expected and damage was limited, traders have seemingly shrugged off concerns about potential issues.

In the video above, Yahoo Finance's Ines Ferré discusses why the oil market's reaction to the rising tensions has been muted.

For more expert insight and the latest market action, click here to watch this full episode of Morning Brief.

This post was written by Stephanie Mikulich.

Video transcript

BRAD SMITH: Also, everyone, this morning, we're tracking oil, edging lower for the second day. As investors await a response from Israel to an unprecedented air assault by Iran. Yahoo Finance's Ines Ferré is here with more. Hey, Ines.

INES FERRÉ: Hey, Brad. Yeah, and analysts saying that that attack by Iran, well telegraphed and the damage contained. And so that's why you saw oil yesterday down but not as much as some had anticipated. Today we are seeing oil down again 3/10 of a percent for both WTI and for Brent Crude.

Look, analysts are saying that if Israel's counterattack were to be-- were to somehow impact oil production from Iran-- remember that Iran produces about 3 million barrels of oil a day-- then that would have an impact on oil. But that's not really expected in the marketplace right now.

You had Andy Lipow saying that oil could rise to $100, $105 a barrel if you did see that production being impacted. And that's why you're still seeing Brent Crude hanging at around $90 per barrel. And even though analysts have been talking about that path to $100, how that could happen, they're saying that that's not likely to happen because OPEC wouldn't want oil prices to be around $100.

Because that would be really demand destruction. They would be risking a recession. And also, they could come onto the market with spare capacity. And that way, they don't lose market share to other players like the US or other oil producers. So $100 a barrel, while possible, certainly analysts are saying that OPEC-Plus would come in with that lever of spare capacity.

Now as far as gold is concerned, we are seeing gold just about 2,388 per ounce. What's been interesting is what analysts have been talking about, this decoupling from a high dollar and gold, and also as far as where you're seeing bond yields going higher, but you're still seeing gold going higher. And that's investors telling you something. Certainly, yes, central banks have been buying up a lot of gold, but also investors contemplating if inflation could perhaps last longer than what is anticipated, guys.