ANKARA

Oil prices drifted lower on Tuesday over easing concerns that the ongoing clashes between Israel and Palestine will have a limited impact on oil trading.

International benchmark crude Brent traded at $87.36 per barrel at 10.21 a.m. local time (0721 GMT), a 0.89% loss from the closing price of $88.15 a barrel in the previous trading session on Monday.

The American benchmark West Texas Intermediate (WTI) traded at the same time at $85.56 per barrel, down 0.95% from Monday's close of $86.38 per barrel.

Both benchmarks had recorded steep increases on Monday, with Brent rising over 5% as markets priced in geopolitical risks after the eruption of the military crisis between Israel and Palestine.

“While Israel's role in global oil supply is limited, the greatest risk is conflict contagion further into the region,” Daniel Hynes, a commodity strategist at Australia and New Zealand Banking Group, told Anadolu in an e-mailed note.

Based on reports on Iran's possible role during the Hamas attack that started late on Saturday, investors chose caution after the US said Monday that “it does not have any information to suggest that Iran helped Hamas plan an unprecedented attack on Israel in which Hamas operatives infiltrated the country from land, sea and air amid barrages of missiles.”

Speaking to reporters on condition of anonymity, a senior Defense Department official said that while Iran is definitely "in the picture" after having provided Hamas with years of support, "we have no information corroborating the specifics" of Iran's reported aid for and sign-off on the attack.”

Iran, with the world's fourth-largest oil reserves, is also the third-largest producer among OPEC members, but its exports have been under strict US sanctions for a long time due to its non-compliance with the 2015 nuclear deal signed between Iran, the US, China, Russia, France, the UK, Germany and the EU.

If the embargo on Iran's oil exports and financial sector is lifted, Iran will be able to export oil again, bringing much-needed barrels to the market.

“Amid reports suggesting Iran may have helped plan the attacks, any broadening of the conflict could see a significant level of supply come under threat,” Hynes said, adding that Iran's potential involvement could also raise the risk of additional sanctions being placed on its oil industry.

“Despite the risks, the impact of the conflict is likely to remain limited in the short term. However, it raises the prospect of a geopolitical risk premium being applied to oil prices,” he said.