As we approach the one-year anniversary of the conflict between Israel and the Palestinian armed group Hamas on October 7, 2024, tensions in the Middle East remain heightened, with ripples felt across regions including the Red Sea, Lebanon, and Iran. Amid concerns that Israel may retaliate against Iran with missile strikes, traders in the options market are making bold bets that Brent crude oil prices could soar past $100 per barrel—marking an increase of over 25% from current levels.

The conflict escalated on October 7, 2023, when Hamas, with support from Iran, initiated a cross-border attack on Israel, leading to a war in the Gaza Strip and a deepening humanitarian crisis. The Iran-backed Houthi movement in Yemen took action by attacking commercial vessels in the Red Sea in a show of solidarity with Hamas, leading shipping companies to reroute their vessels around South Africa. Meanwhile, Hezbollah in Lebanon has continued launching rocket attacks on northern Israel.

In response to these attacks, Israel has utilized its intelligence capabilities to target and eliminate several key leaders of both Hamas and Hezbollah. Consequently, Iran has retaliated with missile strikes on Israeli positions, prompting Israel to contemplate further retaliatory measures. This has raised concerns in the international oil market about potential strikes on Iranian oil facilities.

As we inch closer to the anniversary of the Israel-Hamas conflict, major cities across the globe witnessed significant protests on October 5, with thousands advocating for Palestine and opposing the ongoing war in the region. In London alone, approximately 40,000 pro-Palestine demonstrators took to the streets, while Paris, Rome, Manila, Cape Town, and New York City also saw thousands gathering in solidarity. On October 6, the Israeli military continued its heavy bombardment of southern Beirut and adjacent areas in Lebanon.

Analysts are increasingly worried about the possibility of an Israeli strike on Iranian oil facilities, which include critical sites like Kharg Island, responsible for about 90% of Iran’s oil exports. Eugene, Vice Chairman of S&P Global, noted that Iran has suggested its response may not be as targeted as its previous attacks in April, indicating a worrying escalation of tensions.

J.P. Morgan analyst Karneva commented that although current oil production is meeting demand, the low global inventories mean that any disruption could have significant consequences. Recent data from Bloomberg highlights that bullish call options on Brent crude have surged to unprecedented levels, reflecting heightened activity anticipating prices hitting the $100 mark.

International oil prices rose by over 8% last week, even though the market hasn’t yet experienced any supply losses, with the price surge primarily attributed to rising fears. Kieldorf, a partner at Again Capital, warned that if supply issues do arise, oil prices could skyrocket, potentially increasing by $30 per barrel in certain scenarios. Furthermore, a series of stimulus measures in mainland China have bolstered expectations for economic recovery, which could further strengthen demand for oil.