Oil prices fall slightly after Israel repelled a large-scale airstrike by Iran

US crude oil futures were slightly lower on Sunday as traders breathed a sigh of relief after Israel repelled a large-scale airstrike by Iran and the US stressed it wanted to avoid a more war large in the Middle East.

The West Texas Intermediate contract for May lost 34 cents to $85.32 a barrel as trading began Sunday evening. June Brent crude futures fell slightly to $90.18 a barrel. U.S. crude closed at $85.66 a barrel on Friday, while the global benchmark stood at $90.45. WTI futures started the year around $71 a barrel.

Iran fired more than 300 drones and missiles at military targets in Israel on Saturday in an attack that President Joe Biden described as “unprecedented.” The United States intervened to directly help Israel shoot down nearly all incoming munitions, Biden said in a statement Saturday.

Although significant in size, the Iranian attack caused little actual damage in Israel. The Nevatim Air Base in southern Israel suffered minor damage and a 10-year-old girl was seriously injured, according to Israel Defense Forces spokesman Daniel Hagari.

“The barrage of aerial weapons was plucked from the sky so easily that the whole thing seems well-planned to make a statement without generating further conflict with Israel,” said John Kilduff, an energy expert and founding partner of Again Capital.

The crude oil market is now bracing for the Netanyahu government’s response to the attack and whether it will mark the start of a direct war between Israel and Iran, according to Jorge Leon, senior vice president at Rystad Energy.

“In the worst-case scenario, a strong retaliation by Israel could trigger a spiral of escalation, which could lead to an unprecedented regional conflict,” Leon said in a statement on Sunday. “Under such circumstances, geopolitical rewards would increase significantly.”

The air assault was Iran’s first direct attack on Israeli territory, senior US military officials told reporters on Sunday. The attack was launched from locations in Iran, Iraq, Syria and Yemen, officials said. More than 100 ballistic missiles have been fired at Israel, as well as cruise missiles and land attack drones, a senior administration official said.

The attack was retaliation for an Israeli attack on the Islamic Republic’s diplomatic facilities in Damascus, Syria, earlier this month that killed seven Iranian military officers, including a senior commander.

Both the United States and Iran appeared determined to avoid further escalation. Biden has told Prime Minister Benjamin Netanyahu that his commitment to Israel’s security is ironclad, but that the United States will not participate in offensive operations against Iran, a senior administration official told NBC News.

U.S. national security spokesman John Kirby said on NBC News’ “Meet the Press” on Sunday that Biden does not want a broader deal with Iran. “The next few hours and days will tell us a lot,” Kirby said.

Iran described the attack as a limited operation in which the Islamic Republic exercised its legitimate right to self-defense following the missile attack on its diplomatic facility.

“The matter can be considered concluded,” Iran said mission to the United Nations said on the X day. “However, if the Israeli regime makes another mistake, Iran’s response will be significantly more severe.”

Iran’s UN mission warned the US against intervention in the same message: “It is a conflict between Iran and the rogue Israeli regime, which the US MUST STAY AWAY from!”

Israeli Foreign Ministry spokesman Lior Haiat said Sunday that “Iran must pay a price for its aggression.” The Islamic Revolutionary Guards should immediately be declared a terrorist organization, Haiat said.

“Against Iran’s massive attack, Israel, like any country, has the right to self-defense, and Israel has defended itself and will continue to defend itself against Iranian aggression,” Haiat told al social media platform “X.”

— of CNBC Pippa Stevens contributed to this report.