Oil is trading more than 5% higher Thursday on the heels of President Joe Biden‘s statement that the U.S. spoke with Israel about a possible attack on Iran's oil facilities.

"We're in discussions about that,” Biden said during an interaction with reporters.

Biden seemingly indicated he wasn’t partial to the idea of striking at Iran’s oil facilities, before cutting himself off: “I think that would be a little… anyway.” See video below.

When one reporter asked whether Biden would “allow” Israel to retaliate against Iran, Biden swiftly corrected him: “First of all, we don’t ‘allow’ Israel. We advise Israel.”

Since Oct. 7, 2023, Israel has been fighting Hamas in Gaza as well as Hezbollah in Lebanon. Both groups are considered terrorist organizations by the U.S.

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Oil And The Israel-Iran Conflict

Iran is the seventh-largest oil producer in the world. The country, which backs the Hezbollah militant group, exports around half its production abroad.

China, where oil demand is weak, is its main customer.

Since Iran's missile attack on Israel on Monday, the price of barrels has fluctuated. As of Oct. 3, the price of West Texas Intermediate (WTI) crude oil is $73.83 per barrel. This reflects a 5.32% increase from the previous day’s close of $70.10.

The price of Brent crude is approximately $77.76 per barrel. It has fluctuated within a range of $74.33 to $77.58 for the day.

The U.S., which is producing more oil under Biden than any other U.S. presidential administration, has been filling its reserves. The Biden administration acquired an additional 6 million barrels of crude just this week.

It’s worth noting that ongoing violence in the Middle East puts the Straits of Hormuz at risk. A third of tanker traffic and a fifth of LNG frozen gas is transported through that passageway.

The U.S. and its allies are likely determined to keep the Strait open due to its strategic importance. Any attempt to block the Strait could provoke military intervention.

Iran controls much of the northern coastline of the Strait and has previously threatened to block the passage in response to sanctions or conflicts with Western countries.

Market Reaction

So far, market reaction to the Middle East conflict is relatively mute compared to February 2022 when Russia invaded Ukraine.

At the time, the oil market reacted with significant volatility and disruption, leading to a sharp rise in global prices.

Brent crude, the global benchmark, surged above $100 per barrel for the first time since 2014, and by March 2022, it had briefly spiked to $139 per barrel, near the all-time high.

Oil-related exchange-traded funds, or ETFs, were trending up at last check Thursday afternoon. Here’s where they stand:

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