### Oil Markets Display Resilience Amid Israel-Iran Tensions

The potential escalation of conflict between Israel and Iran is challenging the global market's confidence in the stability of crude oil prices. Historically, turmoil in the oil-rich Middle East has consistently unsettled oil markets and strained the global economy. However, the current situation, marked by middle eastern skirmishes, has not led to significant disruptions in oil prices—a relief for the Biden administration, which has been under political pressure regarding fuel prices.

Recently, Iran launched nearly 200 missiles into Israel, pushing analysts to consider the impacts on the global oil market. Michael Knights, an expert at The Washington Institute for Near East Policy, noted that advancements in diversified oil production from places like the United States and Brazil over the past two decades have reduced market dependency on Middle Eastern oil. This diversification means that even dramatic geopolitical events have resulted in minimal price fluctuations.

Prime Minister Benjamin Netanyahu is now evaluating potential retaliatory measures, which could include targeting Iran's oil fields and nuclear facilities. Such actions could provoke Iran into attacking other key oil-producing countries or disrupting major oil shipment routes in the Persian Gulf.

Despite initial fears, oil traders' reactions have been moderate. Although U.S. crude oil futures saw a temporary spike of over 5% when news of the impending Iranian missile strike reached the market, prices stabilized quickly after most missiles were intercepted. As of Thursday morning, crude was trading at approximately $73 per barrel, a slight rise from the previous days but still below highs seen earlier in the summer.

Energy analysts predict that even severe escalations, such as Iran targeting oil-producing neighbors, might only push prices to about $100 per barrel, potentially raising U.S. gasoline prices to between $3.50 and $4.50 per gallon. Fortunately, the U.S. average price for regular gasoline was $3.19 per gallon on Thursday, significantly down from the $5.03 peak in March 2022 following Russia's invasion of Ukraine.

The Biden administration has actively sought to protect American consumers from oil-related conflicts. Measures include constructing sanctions on Russia to exempt oil at certain prices and deploying military resources to safeguard key oil shipping lanes in the Middle East. Notably, U.S. oil output has risen to historic levels, complemented by increased production from South America, further stabilizing the market.

Saudi Arabia appears unconcerned by the latest hostilities and is more worried about potential oil price drops to $50 per barrel if OPEC+ members fail to adhere to production limits. Experts, including Douglas Rediker from the Brookings Institution, suggest that the Biden administration might dissuade Israel from targeting Iran's oil infrastructure to prevent broader conflict escalation.

In a worst-case scenario, analysts estimate that higher oil prices, resulting from Iran retaliating by closing the Strait of Hormuz, could drive prices as high as $101 per barrel, boosting gasoline prices past $4 per gallon during peak demand. However, Landon Derentz of the Atlantic Council suggests these predictions could be overly pessimistic, emphasizing the development of alternative delivery routes and the reduced impact of such closures on global supplies.

Ultimately, the modern oil market's reduced dependency on any single source indicates a higher risk tolerance, underscored by continued resilience despite significant geopolitical tensions.