Oil prices dropped by over $4 per barrel on Monday, as Israel's weekend strikes on Iran avoided oil and nuclear sites, leaving energy supplies unaffected. Both Brent and U.S. West Texas Intermediate crude fell to their lowest levels since the start of the month. By 1130 GMT, Brent had fallen by $4.28, or 5.6%, to $71.77 per barrel, while WTI dropped by $4.25, or 5.9%, to $67.53.

The benchmarks had risen by 4% the previous week amid volatile trading, reflecting uncertainty around the upcoming U.S. election and Israel's anticipated response to an Iranian missile attack on October 1. Before dawn on Saturday, dozens of Israeli jets carried out three waves of strikes on missile factories and other sites near Tehran and in western Iran, marking the latest confrontation between the two countries.

Analysts noted that the geopolitical risk premium factored into oil prices ahead of Israel's attack had decreased. John Evans at PVM suggested that Israel’s response was strongly influenced by the Biden administration as the U.S. election approaches. Meanwhile, Commonwealth Bank of Australia analyst Vivek Dhar expressed doubts about a swift de-escalation in Middle Eastern tensions, stating that although Israel’s response to Iran was measured, it is unlikely that a lasting ceasefire with Iranian proxies, Hamas and Hezbollah, is imminent.

Citi has adjusted its Brent price target for the next three months, lowering it from $74 to $70 per barrel due to the reduced risk premium in the short term, as explained by analysts led by Max Layton. Additionally, Panmure Liberum analyst Ashley Kelty observed that rhetoric from OPEC+ ministers regarding production quotas will play a significant role in price trends, with potential delays to production increases looking more likely given the soft market outlook and high break-even prices required by most cartel members.