Our Hot Take on Iran’s Attack on Israel

Oil broke above the top of our forecasted trading range when Israel attacked Iranian personnel in Damascus. Now, with Saturday’s Iranian attack on Israel, oil markets have a true black swan. The Western media narrative, shaped by government sources, has framed Iran’s attack as “retaliatory,” circumscribing Israel’s response. The West’s interventions saved Israel from calamity on Saturday, so Israel has little scope to depart from its allies’ wish that there be no counter-retaliation. Iran says it is done, even though the attack had little effect. An embargo or Western sanctions designed to punish Iran by limiting oil production would have little effect on markets. China is effectively Iran’s only export market, and Saudi spare capacity alone could replace Iran’s entire production. We’re comfortable calling the top in oil. Equities have been in a correction since the day of the Damascus attack. Given how far they’ve come and how fast, we can’t be sure the correction is over. But it might be, thanks to the bracing effect of having survived this crisis (assuming we indeed have).