Oil Rises to October High as Israel Braces for Iranian Attack

(Bloomberg) — Oil jumped to the highest price since October on news that Israel is bracing for a possible attack from Iran.

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An assault is expected to come as soon as the next 48 hours, which would mark a significant widening of the Middle East conflict. Global benchmark Brent surged as much as 2.6% to top $92 a barrel, a level last reached during the early days of the conflict that started when Hamas attacked Israel in October.

Israel is expecting a drone or missile attack on government targets within days, either directly or from Iran’s proxies, people familiar with western intelligence assessments said. The move still hasn’t been approved by Tehran’s highest-ranking officials, the people said, while the US has moved additional military assets into the region.

Read More: Israel Bracing for Potential Direct Attack From Iran in Days

“A direct confrontation between Israel and Iran would mean a significant escalation of the Middle East conflict and would lead to a significant rise in oil prices,” Commerzbank analysts including Carsten Fritsch said in a note.

Oil has surged about 19% this year as the Middle East conflict bolsters a market shaped by supply restrictions and stronger-than-expected demand.

The escalating geopolitical tensions — also including attacks on Russian energy infrastructure by Ukraine — have spurred bullish activity in the oil options market. There has been elevated buying of call options — which profit when prices rise — in recent days, with implied volatility jumping to a two-month high. The options on Brent are still trading at a premium over bearish puts.