Oil prices plummeted over 6% following Israel's missile strike on Iran, which intentionally avoided damaging the country's oil production infrastructure. This marked the most significant decline in oil prices since September 2022, as Brent crude dropped to about $72.13 a barrel, while U.S. crude fell to $67.90 a barrel.

The drop in prices followed Israel's retaliation against Iran, a response to a missile attack by Iran on October 1, when approximately 200 ballistic missiles were launched at Israel. Before Israel's strikes, there were fears that targeting Iranian oil facilities could disrupt global energy markets and push prices higher. However, Israel focused on military targets, such as missile production and air-defense sites, sparing oil production sites.

The market's anxiety about potential disruptions to oil supply eased once it became clear that oil facilities were not targeted. UBS analyst Giovanni Staunovo remarked that the lack of damage to oil and nuclear facilities led the market to reassess the risks. It also indicated that Israel warned Iran ahead of the strikes, suggesting both nations may be trying to avoid further escalation.

The situation highlights the delicate balance in the region, especially given Iran's status as the world's seventh-largest oil producer. While tensions had previously driven prices up, the measured nature of Israel's response has led many experts to believe that a wider conflict might be less likely, resulting in a drop in oil prices.

This sharp decline comes in the context of overall weak demand and ample supply in the global energy markets. Recent economic data indicated that China's growth is slowing, further impacting energy demand. China reported an annual growth rate of 4.6% for the July-September quarter, slightly below the previous quarter and short of its 2024 growth target.

As geopolitical tensions eased, oil prices fell from recent highs. U.S. crude had surged above $77 earlier in the month but has now tumbled below $70 per barrel. Prices at the pump have also followed suit, with many U.S. gas stations offering prices below $3 per gallon.

Looking ahead, experts believe oil prices may continue to decline due to an oversupply. The International Energy Agency reported that oil demand growth in the first half of the year was the smallest since 2020, while supplies continued to increase. OPEC+ plans to release more oil into the market, which could further suppress prices.

The geopolitical landscape, combined with weak demand and increased supply, suggests that oil prices may remain low in the near future, benefiting consumers at the pump.