Iraqi Militia Threatens Israel, Pushing WTI Crude up 2.7%

An Iraqi militia’s threat to retaliate against Israel for attacks on Lebanon is sending a fresh wave of geopolitical risk through energy markets, pushing oil prices higher as traders weigh the potential for a wider regional conflict. The warning from the Iraqi “Islamic Resistance” group ends a two-week ceasefire and directly challenges stability in a region critical to global energy supply, causing front-month WTI crude futures to jump 2.7% to $115.42 a barrel.

“Markets continue to price in a heightened geopolitical risk premium driven by escalating U.S.-Iran tensions and the looming deadline on reopening the Strait of Hormuz,” Naeem Aslam, chief investment officer at Zaye Capital Markets, said in a commentary.

The market reaction was immediate, with front-month Brent crude futures also rising 1.8% to $111.69 per barrel. The move reflects growing concern that any escalation could disrupt already tight global supplies. According to strategists at ING, a further escalation would inevitably push up oil prices and increase expectations of rate hikes by central banks as they battle to contain inflation.

At stake is the fragile balance of an oil market where, as Zaye Capital’s Aslam notes, a structurally tight supply outlook and recovering demand are already keeping prices firmly above $100 a barrel. The threat from the Iraqi militia adds another layer of complexity, particularly with fading hopes around Iran reopening the Strait of Hormuz. Any disruption to this critical chokepoint could have severe implications for global oil shipments. The ING strategists also noted that a better-than-expected U.S. jobs report suggests the American economy might be better positioned to withstand the economic fallout than others, a factor that could lead the Federal Reserve to maintain a more hawkish stance.

This article is for informational purposes only and does not constitute investment advice.