Oil prices fell more than $4 as markets digested the scale of Israel's attack on Iran on Saturday.
West Texas Intermediate crude futures fell about $4 to $69.79, while Brent crude futures fell to $71.99.
Israel launched three waves of strikes on military targets in Iran on Saturday, avoiding targeting oil and nuclear facilities, providing some respite to markets that had been anticipating the strike to see how it would impact prices.
Oil prices rose on Friday after two days of declines, posting weekly gains as traders focused on the risks of escalating conflict in the Middle East. West Texas Intermediate crude rose 2.3% to settle near $72 a barrel, above its 50-day moving average, while Brent crude settled above $76.
Oil prices have been volatile this month, with US crude trading in a range above $3.50, due to tensions in the Middle East and concerns that the market will face a supply surplus next year, as non-OPEC+ production grows and the alliance plans to ease production curbs. The International Energy Agency warned last week that global demand growth would continue to decline, due to a slowdown in the Chinese economy.
The developments prompted traders to hedge against price volatility. The oil market saw a surge in derivatives activity ahead of the Israeli attack, with traders holding a record number of Brent options, and prices for contracts that hedge against rising prices were at their highest levels compared to contracts betting on a decline since shortly after Russia invaded Ukraine in 2022.
