Oil futures were barely moved by Iran’s unprecedented attack on Israel, with traders attributing the lackluster price action to the notion that the strike was well-flagged beforehand, and expectations that the conflict will remain contained in the aftermath. As Israel weighs its response to the assault, here’s what market watchers are saying about the outlook:

$100 Is Possible — Citigroup

Citigroup Inc.’s base case is for tensions to remain “extremely high” in the Middle East, underpinning prices. That’s prompted the bank to raise its short-term price forecasts, with the three-month target for West Texas Intermediate increased by $8 a barrel.

“What is not priced into the current market, in our view, is a potential continuation of a direct conflict between Iran and Israel, which we estimate could see oil prices trade up to +$100/bbl, depending on the nature of the events,” analysts including Max Layton wrote in a note.

‘Risk Premium’ — Goldman Sachs

“We estimate that oil prices already reflect a $5-to-$10-a-barrel risk premium from downside risks to supply,” before the weekend attacks by Iran, Goldman Group Sachs Inc. analysts including Daan Struyven said in a note. “The potential Israeli response to Iran’s attack is highly uncertain and will likely determine the extent of threat to regional oil supply.”

Iranian crude production has risen by more than 20% over the past two years to 3.4 million barrels a day, or about 3.3% of global supply, the analysts said. So, “if the market were to price a higher probability of reduced Iran supply, then this could contribute to a higher geopolitical risk premium,” they said.

More Risk for Direct Military Action — SocGen

“We believe that the immediate risk of a direct confrontation has been contained – at least for now. At the same time, the tail of the event risk distribution has just become heavier with pathways to escalation involving the US increasing,” said Benjamin Hoff, global head of commodities research at Societe Generale SA.

Since Iran’s attack, the risk of direct military action unfolding between the US and Iran has risen to 15% probability from 5% and Brent prices will spike well above $140 under such a scenario, he said. The bank has hiked its Brent price forecast by $10 across the projection horizon to reflect the likely persistence of a geopolitical risk premium.

Uneasy Calm — UOB

With the outlook for oil remaining highly uncertain, it’s likely that prices will climb toward $100 a barrel or higher should Iran’s crude production come under threat, United Overseas Bank Ltd. said in a note. Still, there’s also a risk of renewed higher crude production from Saudi Arabia and the OPEC+ coalition which may help stabilize energy markets, the bank said.

Watch for Possible Response — ICG

Iran has been signaling that “this was it, it won’t do anything else, but I’m just not sure not responding is an option for Israel,” said Dina Esfandiary, a London-based senior adviser for the Middle East at the International Crisis Group. “The only game-changer is that the US has made it clear it would not support an Israeli retaliation, so this might constrain Tel Aviv somewhat.”

Maintain Its Balance — SVB Energy 

“If the recent retaliatory attacks between Iran and Israel cease at their current level, or refrain from escalating in the region without causing damage to oil production and export facilities, the market should maintain its balance,” said Sara Vakhshouri, founder and president of SVB Energy International LLC. “Market fundamentals appear stable, with OPEC+ closely monitoring the rising demand expected for the summer season. Should there be any supply shortages in the market, OPEC+ might consider reducing voluntary cuts and increasing production.”

‘Already Priced In’ — ING Groep

“The market had already priced in some form of attack, while limited damage and no loss of life means the potential for a more measured response from Israel,” ING Groep NV strategists Warren Patterson and Ewa Manthey said in a note. “How Israel responds is now the key uncertainty.”

For oil, “the first risk is that oil sanctions are more strictly enforced against Iran, which could see anywhere between 500,000 to 1 million barrels a day of oil supply lost,” they said. Other possible outcomes include Israel attacking Iranian energy infrastructure or Iran blocking the Strait of Hormuz.

‘To the Shadows’ — RBC Capital Markets

The response from Israel’s government to Iran’s attack will determine whether the situation leads to a wider war, or whether the risks of escalation abate, according to RBC Capital Markets LLC analysts including Helima Croft. A significant Israeli retaliation could trigger a destabilizing cycle, they said. 

“In such a scenario, we think the risk to oil is not insignificant given the Iranian seizure of the vessel in the Strait of Hormuz that preceded the missile and drone attacks,” the analysts said. Still, “if Israel stands down or carries out a de minimis response, it seems that Iran might very well take the opportunity to return this war to the shadows.”

‘Heightened Oil Security Risks’ — IEA

Iran’s air attacks on Israeli military facilities provided a fresh reminder of the importance of oil security, while increasing the risk of volatility in oil markets, according to the International Energy Agency.

Global oil markets had already tightened before the Iranian retaliation, with further geopolitical tensions in the Middle East now putting a focus on the security of supply, it said in a newsletter. The developments will be tracked closely, it added.

‘Escalation Is Unlikely’ — ANZ Banking Group

“The fact that the attack was so well-telegraphed suggests any further escalation is unlikely,” said Daniel Hynes, senior commodity strategist at ANZ Banking Group Ltd. “The geopolitical risk premium is also elevated, so it doesn’t warrant any further gains until Israel’s response to this attack is clear.”

“The market needs to see further evidence that supply is at greater risk before pushing prices higher,” he added.

‘Sigh of Relief’ — Again Capital

“The oil market can breathe a sigh of relief, at least for now,” said John Kilduff, founding partner of Again Capital LLC.

“There was lots of buying on geopolitical tensions last week, but as the story developed, what didn’t happen was a real escalating of tensions.”

‘Stricter Sanctions’ — A/S Global Risk Management

“The situation is fluid, and if Israel signals it will not retaliate, market tensions will ease,” said Arne Lohmann Rasmussen, head of research at A/S Global Risk Management. The market’s worst-case scenario is a closure of the Strait of Hormuz, although that outcome seems unlikely, he said.

Instead, “stricter sanctions on Iran are likely,” he said. “The US-led sanctions on Iran are already very comprehensive, but Iran has still been able to step up production and exports over the last year.”

(Adds SocGen and UOB’s comments in paragraphs six to eight)